Three Essays in Macro-Finance.
In Chapter 1, I use a structural approach, to quantify the effect of land-use regulations on different age and education groups. I estimate a dynamic spatial structural equilibrium model of household location choice, local housing supply, and amenity supply. I show that in the long-run, removing land-use restrictions benefits all household groups and increases aggregate consumption by 7.1%. These consumption gains vary across households, less educated and younger households see increases in consumption about twice as large as more educated or older households. In contrast, in the short-run, removing land-use regulations reduces the consumption of older-richer homeowners while increasing the consumption of younger renters. In a counterfactual 1990-2019 transition, abolishing land-use regulations reduces the consumption of households born before the mid-1960s, while increasing consumption of more recent generations.
In Chapter 2, co-authored with Mahyar Kargar, Benjamin Lester, Shuo Liu, Pierre-Olivier Weill, Diego Zuniga, we study liquidity conditions in the corporate bond market during the COVID-19 pandemic. We document that the cost of trading immediately via risky-principal trades dramatically increased at the height of the sell-off, forcing customers to shift toward slower agency trades. Exploiting eligibility requirements, we show that the Federal Reserve’s corporate credit facilities have had a positive effect on market liquidity. A structural estimation reveals that customers’ willingness to pay for immediacy increased by about 200 bps per dollar of transaction, but quickly subsided after the Fed announced its interventions. Dealers’ marginal cost also increased substantially but did not fully subside.
In Chapter 3, co-authored with Diego Zuniga, we study inter-dealer trading patterns in the US corporate bond market. We document that dealers trade with only a small group of other dealers and that this group of dealers is highly persistent over time. We show that the longer a dealer pair have been trading the more likely that they will continue to trade and the larger the bilateral volume traded between them. We measure trading costs between dealers and show that stronger relationship leads to lower trading costs. Motivated by our empirical work we develop a structural model of trading relationships. The existence of double marginalization leads to inefficiency. We show that the repeated nature of the interactions between dealers allows them to form relationships and hence restore optimality.