Working papers

The Allocation of Corporate News
with Xing Guo and Alistair Macaulay.

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.

Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media
with Alistair Macaulay.
Media coverage: New York Times, Central Banking.

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.

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 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.

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.

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.

Policy analysis

People’s Republic of China: Selected Issues
with various coauthors, IMF Country Report No. 2021/012, as part of Article IV Consultation, 2021.

The U.S. Economic Outlook for 2020–2022
with Jacob Burton, Gabriel Ehrlich, Daniil Manaenkov, and Aditi Thapar, Research Seminar in Quantitative Economics, 2020.