Working papers
The (Mis)Allocation of
Corporate News
with Xing Guo and Alistair Macaulay.
[abstract]
This paper studies how the distribution of information supply by the news media affects the macroeconomy. We document
three connected facts on media's reporting of firm news: corporate news coverage is highly concentrated, particularly
among the largest firms; firms' equity financing and investments rise after media coverage; and yet these responses are
largest among small, rarely-covered firms. We develop a heterogeneous-firm model with a media sector that matches these
facts. Asymmetric information between firms and investors leads to financial frictions that constrain firms' financing
and investments. Media's role in alleviating information frictions is limited by its focus on large and financially
unconstrained firms. Reallocating news coverage, or allowing firms to buy coverage from outlets in a competitive market,
leads to substantial increases in aggregate investment and output. The aggregate effects of media coverage therefore
depend crucially on how that coverage is allocated.
An Anatomy of Firms' Political Speech
with Pablo Ottonello and Sebastian Sotelo.
[abstract]
We study the distribution of political speech across U.S. firms, using large language models to measure political
engagement in firms' communications. Our analysis reveals five facts: (1) Political engagement is rare. (2) It is
concentrated among large firms. (3) Firms specialize in specific topics and outlets. (4) Large firms engage in a broader
set of topics and outlets. (5) The 2020 surge in political engagement was associated with increased engagement by
medium-sized firms and a shift in political topics. These findings suggest fixed costs to political engagement and the
dominance of large firms’ views in the political space.
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.
Published and accepted papers
Financial Intermediaries and the
Macroeconomy: Evidence from a High-Frequency Identification
with Pablo Ottonello, conditionally accepted,
Economic
Journal.
[data]
[abstract]
We provide empirical evidence on how news about financial intermediaries' net worth impacts the aggregate economy,
using
a high-frequency identification strategy. We measure "financial shocks" based on the idiosyncratic stock-price
changes
of large U.S. intermediaries in a narrow window around their earnings announcements. We document significant effects
of
these shocks on the stock price and borrowing costs of nonfinancial firms, as well as on macroeconomic variables.
The
effects are more pronounced for firms with low credit ratings and when the aggregate net worth of intermediaries is
low.
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.