Bounded Rationality in Financial Intermediation and Monetary Policy

Agents estimate asset returns using limited information about the economy, and within the banking sector, estimates of the cost of funding affect lending supply. While post-crisis financial regulations sought to improve financial stability, it remains uncertain whether this type of bounded rationality amplifies financial vulnerabilities and risk taking. I study the post-crisis information environment and find that agents overprice the market value of banks. To rationalize these findings, I introduce restricted perceptions in a New-Keynesian model with financial intermediaries and examine the role of bounded rationality in financial intermediaries monetary policy.

Distributional effects of beliefs on return on equity

A study of the effect of changes in beliefs regarding the performance of stock market on the wealth distribution. I motivate the paper by highlighting the relative importance of stocks in households' portfolios and the life cycle. Moreover, I document i) a downward shift in beliefs and the distribution of investors according to their beliefs, and ii) higher concentration of wealth and stock holdings. The working hypothesis is that revised expectations may crowd out saving and consumption differentially across agents with different beliefs through portfolio rebalancing and bequeathed assets by amplifying the different savings motive that shape the wealth distribution. My analysis is motivated by an empirical section that examines the effect of information shocks (as identified by Jarocinski et al. 2020) on the elicited beliefs of investors.

I study the implementation of the Basel III capital requirements and financial inclusion in Mexico. I argue that banks held precautionary capital buffers in an environment with uncertain regulation. Although the new capital requirements were more stringent, most banks were well above the threshold and gradually reduced their capital ratio. I document that banks were uncertain about the requirement that was to be implemented. Upon the announcement of the rollout of the capital requirements and the resolution of the uncertainty, banks expanded their lending. I posit that credit rationing s a plausible mechanism for banks to retain market power without dampening financial inclusion. 

Capital requirements and Financial Access: The case of México

Working Papers

The Impacts of Mortgage Servicer Licensing Requirements

The 2007-2008 U.S. financial crisis illustrated the way in which mortgage servicers, through their role in influencing deliquencies, foreclosures, and in administering mortgage modification programs, can influence housing market outcomes at a broad scale. We study a wave of state-level mortgage servicer licensing laws passed in the wake of the crisis. We study mortgage market outcomes using a difference-in-differences approach and pooled mortgage-backed security outcomes using an exposure design. We find evidence that the reforms decreased in late-stage delinquencies and foreclosures. Compliance costs may have been passed through to increased interest rates. Other borrower and loan characteristics were unchanged.

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