Job Market Paper

The Rise of Non-bank Financial Intermediaries: Implications for Monetary Policy  

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Current draft:  Nov 12, 2022. 

Abstract: This paper analyzes the role of financial market structure in the transmission of monetary policy. Empirically, commercial banks shrink lending, and non-bank financial intermediaries (NBFIs) expand loans when monetary policy tightens. I propose a novel explanation by investigating the difference in loan-rate-setting strategies due to market power rather than the distinction in depositor clientele preference, as in Xiao (2019). Compared with commercial banks, NBFIs bear greater interest-rate risks by issuing fixed-rate loans because they are less concentrated. Firms switch from commercial bank loans to non-bank loans when anticipating monetary tightening. I then construct a quantitative DSGE model comprising banks and non-banks with market power and leverage management disparities. After estimating the model using Bayesian techniques with US data from 1987Q1 to 2008Q4, I replicate the leakage of monetary policy via the non-bank sector. In the counterfactual analysis, a larger non-bank sector dampens the effect of monetary policy on investment by 15%. Lowering relative market concentration for NBFIs negatively impacts policy effectiveness if their loan rate markup decreases.

Basel III Implementation in the U.S. Context  

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Current Draft: Fed 5, 2023

Abstract: This paper analyzes the impact of global systematically important banks (GSIBs) capital surcharge and counter-cyclical capital buffer (CCyB) when commercial banks (CBs) and nonbank financial intermediaries (NBFIs) coexist in the US. Using the framework from Yang (2022), I find the presence of nonbanks amplifies the credit cycle by 100% and dampens the business cycle by 50% when the GSIB surcharge is implemented. When regulators execute the CCyB rule with a credit-to-GDP gap measure, considering aggregate credit instead of bank credit smooths the credit cycle volatility by 4%. The central tradeoff for the optimal CCyB is between dampened credit fluctuations and leakage toward unregulated nonbanks. 

Airbnb as a Novel Housing Investment Option 

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Current Draft: Dec 31, 2022

Abstract: This paper introduces both short-term and long-term housing rental investments into a standard portfolio choice model to analyze the impact of Airbnb on housing allocations in New York City, using Airbnb data in New York City from 2015 to 2019. The model is solved globally using the Smolyak grid method on the UVA supercomputer Rivanna using parallel computing. Based on the framework developed, I comment on policy questions such as rent control and Airbnb tax.