Published and accepted papers
Firm Inattention and the Efficacy of
Monetary Policy: A Text-Based Approach
with Samuel Stern, accepted,
Review of Economic Studies.
Media coverage: Central
Banking.
[data]
[abstract]
This paper provides empirical evidence of the importance of firm attention to macroeconomic dynamics. We construct a
text-based measure of attention to macroeconomic news and document that attention is polarized across firms and
countercyclical. Differences in attention lead to asymmetric responses to monetary policy: expansionary monetary
shocks raise market values of attentive firms more than those of inattentive firms, and contractionary shocks lower
values of attentive firms by less. Attention also mitigates the effects of macroeconomic uncertainty on firm
performance. In a quantitative rational inattention model that is calibrated with this new text-based measure,
inattention drives monetary non-neutrality. As average attention varies over the business cycle, so does the
efficacy of monetary policy.
News Media, Inflation, and
Sentiment
with Alistair Macaulay, AEA Papers and
Proceedings, 113: 172-176, May 2023.
[data]
[abstract]
We study the relationship between media portrayals of inflation and consumer sentiment. Using tools from natural
language processing, we uncover two competing narratives in US news coverage of inflation: the first relates
inflation to financial variables, while the second relates inflation to real variables. As inflation rose in 2021,
media increasingly emphasized the real economy. Linking inflation news to social network data from Twitter, we find
that exposure to articles emphasizing the connection between inflation and the real economy significantly reduces
sentiment, particularly in periods of high inflation. Shifting media narratives may therefore have contributed to
declining consumer sentiment in 2021.
Monetary Policy
Transmission and Policy Coordination in China
with Sonali Das,
China Economic Review, 82, December 2023.
[data]
[abstract]
We study the transmission of conventional monetary policy in China, focusing on the interaction between monetary and
fiscal policy given the unique institutional set-up for macroeconomic policy making. Our results suggest some
progress but also continued difficulties in the transmission of monetary policy. Similar to recent studies, we find
evidence of monetary policy pass-through to interest rates. However, the impact of monetary policy measures that are
not coordinated with fiscal policy is significantly weaker than that of coordinated measures. This suggests the need
for further improvements to the interest-rate based framework.
Working papers
Financial Intermediaries and the
Macroeconomy: Evidence from a High-Frequency Identification
with Pablo Ottonello, conditionally accepted,
Economic
Journal.
[abstract]
We provide empirical evidence on the effects of news about financial intermediaries’ net worth on the aggregate
economy based on a high-frequency identification strategy. We measure "financial shocks" as the idiosyncratic
changes in market value of large U.S. intermediaries’ net worth in a narrow window around their earnings
announcements. We document sizable effects of financial shocks on the market value and borrowing costs of
nonfinancial firms and macroeconomic outcomes. Evidence based on sign restrictions suggests that shocks primarily
affecting credit supply drive these effects. In addition, the effects of financial shocks are larger for firms with
high default risk and low liquidity, and when the aggregate net worth of intermediaries is low.
Narrative-Driven Fluctuations in Sentiment: Evidence Linking
Traditional and Social Media
with Alistair Macaulay.
Media coverage:
New York Times,
Central
Banking.
[abstract]
We study the empirical importance of narratives by linking narratives in newspapers to the sentiment of social media
users. First, we model narratives as directed acyclic graphs and show how exposure to different narratives can
affect expectations in an otherwise-standard macroeconomic model. We then measure competing narratives in news media
reports on the US yield curve inversion in 2019, using techniques in natural language processing. Linking these
narratives to data from Twitter, we show that exposure to the narrative of an imminent recession is associated with
a more pessimistic sentiment, while exposure to a more neutral narrative implies no such change in sentiment. In
addition, we find that narratives are contagious: their effects spread in the social network, even to those who are
indirectly exposed.
The Allocation of Corporate News
with Xing Guo and Alistair Macaulay.
[abstract]
This paper studies the macroeconomic consequences of selected information supply by news media. We document
empirically that media's reporting of business news is concentrated, particularly among the largest firms. News
coverage
is associated with higher likelihood of obtaining financing, higher investment, and greater profitability. In a
quantitative model with a media sector that matches these facts, media reporting alleviates asymmetric information
in
financial markets for reported firms. However, media coverage concentrates on large firms who are not financially
constrained. Therefore, reallocating media coverage would promote firm growth, since small and young firms who
benefit
the most from media's information revelation are currently under-reported.
An Anatomy of Firms' Political Speech
with Pablo Ottonello and Sebastian Sotelo.
[abstract]
We study the distribution of political speech across U.S. firms. We develop a measure of political engagement based on firms' communications (earning calls, regulatory filings, and social media), by training a large language model to identify statements that contain political opinions. Using these data, we document five facts about firms' political engagement. (1) Political engagement is rare among firms. (2) Political engagement is concentrated among large firms. (3) Firms tend to specialize in specific topics and outlets. (4) Large firms tend to engage in a wider set of topics and outlets. (5) The 2020 surge in firms' political engagement was associated with an increase in the engagement of medium-sized firms and a change in the mix of political topics.