Annual county-level bank concentration measured by HHI based on deposit market shares. Source: FDIC.

Histogram of loan rates (ARM 1/30) for branches in regions with high (low) concentration classified by HHI > (<) 0.18 in red (blue). Federal funds target in dark red. Source: RateWatch, FRED.

Histogram of deposit rates (12m CD) for branches in regions with high (low) concentration classified by HHI > (<) 0.18 in red (blue). Federal funds target in dark red. Source: RateWatch, FRED.


This paper analyzes the implications of the gradual rise in bank concentration since the 1990s for the transmission of monetary policy. I use branch-level data on deposit and loan rates to evaluate the monetary policy pass-through conditional on the level of local bank concentration and bank capitalization. I find that banks operating in high-concentration markets and under-capitalized banks adjust short-term lending rates more. I then build a theoretical model with heterogeneous banks that rationalizes the empirical findings and explains the underlying mechanism. In the model, monopolistic competition in local deposit and loan markets, along with bank capital requirements, lead to frictions on the pass-through to the real economy. Counterfactual analyses highlight that the rise in bank concentration alters monetary policy pass-through by two channels: the market power and capital allocation channels. Both channels further strengthen monetary policy transmission to output and investment, amplify the credit cycle, and flatten the Phillips curve.

Presented at:  European Central Bank, Board of Governors of the Federal Reserve, Banco Central de Chile, CEBRA annual meeting 2020, 2nd Workshop ``Women in Macro, Finance and Economic History'' (WIMFEH), 15th Economics Graduate Students' Conference (EGSC), University of Würzburg, 20th Annual FDIC/JFSR Bank Research Conference, SNDE 2022, Christian-Albrecht University of Kiel, IE University, Bank of England, LMU Munich, Norges Bank, Fairfield University, De Nederlandsche Bank, TU Dortmund, WU Vienna, Miami University, Federal Reserve Bank of Philadelphia, EEA Milano, MEG 2022, SNDE Symposium for Young Researchers, 4th EMMMC, CEPR Workshop Empirical Monetary Economics 2022, CRC Workshop "Global Crises, Financial Markets and the Role of Monetary Policy", EWMES 2022, 1st XAmsterdam Macroeconomic Workshop, University of Bonn

 This paper examines the pass-through of cost-push shocks to customers at a granular level. Using unique firm-level survey data, we document five facts about pass-through across firms, sectors, and over time. We highlight a new channel relevant for pass-through: beliefs about the expected duration of the shock and its interaction with price rigidities. We then employ a hypothetical vignette to study the causal effect of nominal and real rigidities as well as the nature of the shock - size, duration, and economic environment - on pass-through. We observe gradual pass-through stretching over 24 months, especially for idiosyncratic shocks, undershooting the pass-through of aggregate shocks by 40%, in line with the presence of real rigidities. The survey design further allows us to infer the implied slope of the Phillips curve, which flattens after accounting for strategic complementarities.

Presented at: Banque de France, 13th ifo Conference on Macroeconomics and Survey Data, ifo Venice Summer Institute, Lisbon Macro Workshop, Verein für Socialpolitik*, 30th CEPR European Summer Symposium in International Macroeconomics (ESSIM), LMU Munich

The recent surge in inflation led many unions and firms to alter their bargaining and wage-setting policies. Using novel German firm-level survey data, we document the extent of state dependency of wage-setting behavior across firms and workers given low vs. high inflation environments. The granularity of our micro-level data also allows us to study heterogeneous patterns across sectors, firms, and workers. Embedding the empirical findings in a New Keynesian model with heterogeneous firms, we then analyze the implications of state-dependent wage-setting behavior for the transmission and propagation of shocks. Lastly, we discuss the interaction of state-dependent wage setting with firms' monopsony power and how these features may impact monetary policy and the slope of the Phillips curve. 

Presented at: Bavarian Macro Day, University of Graz, LMU Munich, 13th ifo Conference on Macroeconomics and Survey Data, Verein für Socialpolitik*, FAU/IAB*

We study monetary policy in a New Keynesian model with a variable credit spread and scope for central bank asset purchases to matter. A novel financial and labor market interaction generates an endogenous cost-push channel in the Phillips curve and a credit wedge in the IS curve. The ``divine coincidence" holds with the nominal short-term rate and central bank balance sheet available as policy tools. Credit spread-targeting balance sheet policy provides a determinate equilibrium with a fixed policy rate. This policy induces similar welfare losses relative to dual-instrument policy as inflation-targeting interest rate policy with a fixed balance sheet.

Presented at:  I-85 Macroeconomics Workshop, Midwest Macro Spring 2022, Bank of Canada, ASSA 2022 Annual Meeting (poster session), LMU Munich, University of Notre Dame. 



- Monetary Policy, Bank Rate Pass-Through, and Income Source (with J. Pandolfo)

- The Granularity of Corporate Savings (with M. Dao, C. Jones, and N. Li)

This paper presents new evidence that the global rise in corporate saving across major advanced economies over the last two decades is driven by large firms. Their rapid growth in gross profits as a share of corporate value added, coupled with sluggish growth in dividend payment, has been the main source for the differential change in saving rates between large and small firms. We develop a model where liquidity constraints and financial frictions amplify exogenous heterogeneity across firms. We illustrate how the trend decline in the global real interest rate can rationalize the observed pattern of rising granularity in corporate savings, as larger and less constrained firms are better able to exploit more profitable investment opportunities. These firms, in turn, grow more rapidly, endogenously causing higher concentration within industries. 


- "Identifying Monetary Policy Shocks Using the Central Bank's Information Set", joint with R. Bachmann and E. Sims, Journal of Economic Dynamics and Control (2022), Vol. 145. [NBER working paper


- “Effectiveness of Unconventional Monetary Policy in the Euro Area: An Assessment Based on a Literature Survey”, joint with S. Fiedler, N. Jannsen, M. Wolters, Credit and Capital Markets (2017), Vol. 50 (4).

- “Transmission channels of unconventional monetary policy in the euro area: Where do we stand?”, joint with S. Fiedler, N. Jannsen, M. Wolters, In-Depth Analysis prepared for the Monetary Dialogue of the European Parliament (2016), 35pp.

- “The Development of German Investment Activity in a European Comparison – the Role of Price and Volume Effects”, joint with E. Wieland, T. Wollmershäuser, ifo Schnelldienst (2015), Vol. 68 (16), 39-50, August.

- “How Fast Does an Economy Recover after a Currency and Government Debt Crisis?”, joint with K. Wohlrabe, T. Wollmershäuser, ifo Schnelldienst (2015), Vol. 68 (13), 56-57, July.