Plamen Nenov

The Review of financial studies 33(9) p. 4139-4185 Doi: https://doi.org/10.1093/rfs/hhz130

We study dividend payouts when banks face coordination-based rollover crises. Banks in the model can use dividends to both risk shift and signal their available liquidity to short-term lenders, thus, influencing the lenders’ actions. In the unique equilibrium both channels induce banks to pay higher dividends than in the absence of a rollover crisis. In our model banks exert an informational externality on other banks via the inferences and actions of lenders. Optimal dividend regulation that corrects this externality and promote financial stability includes a binding cap on dividends. We also discuss testable implications of our theory.

NBER Working Paper Series Doi: https://doi.org/10.3386/w25959

We provide evidence on the stock market consumption wealth effect by using a local labor market analysis and regional heterogeneity in stock market wealth. An increase in local stock wealth driven by aggregate stock prices increases local employment and payroll in nontradable industries and in total, while having no effect on employment in tradable industries. In a model with consumption wealth effects and geographic heterogeneity, these responses imply a marginal propensity to consume out of a dollar of stock wealth of 2.8 cents per year. We also use the model to quantify the aggregate effects of a stock market wealth shock when monetary policy is passive. A 20% increase in stock valuations, unless countered by monetary policy, increases the aggregate labor bill by at least 0.85% and aggregate hours by at least 0.28% two years after the shock.

Journal of the European Economic Association Doi: https://doi.org/10.1093/jeea/jvz069

Housing transactions by moving homeowners take two steps—buying a new house and selling the old one. This paper argues that the transaction sequence decisions of moving homeowners have important effects on the housing market. Moving homeowners prefer to buy first whenever there are more buyers than sellers in the market. However, this congests the buyer side of the market and increases the buyer–seller ratio, further strengthening the incentives of other moving owners to buy first. This endogenous strategic complementarity leads to multiple steady state equilibria and large fluctuations, which are broadly consistent with stylized facts about the housing cycle.

The Review of financial studies 30(11) p. 3888-3920 Doi: https://doi.org/10.1093/rfs/hhw077

I study asset price amplification in an asymmetric information model. Entrepreneurs issue debt to finance investments in a physical asset. They have private information about their success probabilities. For a given debt level, higher asset prices require entrepreneurs to invest more of their own funds. This makes bad entrepreneurs more reluctant to mimic good ones; as a result, good entrepreneurs increase their equilibrium leverage and invest more, and this amplifies the initial asset price increase. This model generates predictions about the credit market that are qualitatively consistent with existing evidence.

Economic Journal 126(598) p. 2402-2423 Doi: https://doi.org/10.1111/ecoj.12305

This article uses cross-sectional variation in transaction seasonality and a search-theoretic framework to develop a test for thick-market effects from matching efficiency. The test relates the extent of transaction seasonality to the degree of horizontal housing heterogeneity. We find a strong positive association between measures of seasonality and housing heterogeneity using a transaction level dataset for Norway, which is consistent with the presence of thick-market effects. These results also show that the degree of horizontal heterogeneity of the housing stock is an important determinant of the extent of seasonality in a housing market.

Review of economic dynamics 18(4) p. 863-880 Doi: https://doi.org/10.1016/j.red.2015.08.002

Migration frictions are important for understanding key features of gross migration and housing markets. This paper studies a multi-region equilibrium model with frictional migration. Idiosyncratic preference shocks, a mobility cost, and imperfectly directed migration lead to slow worker reallocation in response to changes in local conditions. This leads to a dependence of local house prices on the history of labor market shocks. The model accounts for the comovements of unemployment and rental and house prices with gross migration observed in a panel of U.S. cities. Structural estimation reveals a high mobility cost for unemployed workers and a low probability of directed migration. Both of these imply that regional reallocation has a limited importance for the aggregate labor market and that the e ects of housing markets on reallocation are small.

Journal of Economic Theory 158 p. 739-768 Doi: https://doi.org/10.1016/j.jet.2014.03.005

When crises potentially originate from coordination failures, does a deterioration in the quality of the information available to market participants contribute towards instability? We address this question in a general global game of regime change with a unique equilibrium and illustrate the implications in a debt rollover application. We show that a reduction in the quality of information increases the likelihood of regime change, thus reducing stability, when the net payo in the case of a successful attack is more sensitive to the fundamentals than the net payo in the case of status quo survival. We also discuss welfare implications.

NBER Working Paper Series Doi: https://doi.org/10.3386/w21686