Working Papers

Bankruptcy Resolution and the Macroeconomics of Cash Flow Based Lending (Job Market Paper)

This paper argues that high bankruptcy reorganization costs limit access to cash flow-backed borrowing, distort firm financing and depress aggregate productivity. I develop a general equilibrium model with heterogeneous firms that may borrow against physical assets or expected future cash flows and bankruptcy outcomes reflecting Chapter 7 (liquidation) and Chapter 11 (reorganization) of the U.S. bankruptcy code. Due to high reorganization costs, smaller firms are at an elevated risk of liquidation, which prevents them from credibly pledging future earnings as collateral. As a result, asset-poor firms are constrained by insufficient physical collateral on the one hand and elevated liquidation risk on the other. Calibrated to U.S. firm-level data, the model shows that reducing reorganization costs narrows the financing gap between small and large firms, and raises aggregate productivity by promoting firm entry and reallocating capital. These results highlight the benefits of a reorganization-friendly bankruptcy regime. Size-based reforms, such as the 2019 Small Business Reorganization Act, can generate substantial macroeconomic gains by improving small firms’ access to external finance.

The Role of House Prices for Intergenerational Wealth Transmissions
(Joint with: Leo Kaas and Alexander Ludwig)

Using German survey data, we document that individuals from higher-educated parental backgrounds accumulate greater housing wealth and achieve higher homeownership rates over the life cycle. Before the 2010s housing boom, differences by parental education were modest, but the boom sharply widened gaps in both ownership and housing wealth. These results hold after accounting for a broad set of individual characteristics, suggesting that intergenerational wealth transfers play an important role in explaining the observed patterns. To explore the mechanisms behind these findings, we build a quantitative overlapping-generations model with intergenerational linkages, debt-to-income and loan-to-value borrowing constraints, and endogenous housing demand. The model quantifies how borrowing constraints interact with intergenerational housing transfers: rising house prices expand borrowing capacity for households with inherited housing equity but constrain those without, thereby reinforcing wealth persistence across generations.

The Macroeconomic Effects of Targeted Credit Funding Programs: Evidence from Hungary

In the aftermath of the sovereign debt crisis, the Central Bank of Hungary implemented a large-scale funding-for-lending scheme designed specifically to subsidize Small and Medium Enterprises' (SMEs) access to external finance. This unique policy design allows me to identify the effects of this program as asymmetric credit supply shocks specific to the SME sector. I find that, compared to general credit supply shocks, such shocks had a larger and more persistent effect on output for a given unit of lending, substantially improving lending conditions and supporting the real economy during the post-crisis recovery. Moreover, rather than crowding out lending to large enterprises, the program also produced considerable positive spillover effects on this sector. These results are robust to different proxies of economic performance and alternative identification strategies. I conclude that under tight lending conditions, funding for lending schemes are more effective if concentrated on SMEs.

A Model-Based Comparision of Macroprudential Tools  
(Joint with: Eyno Rots)

We develop a DSGE model to analyze a macroprudential policy framework. We use it to describe the Hungarian economy and the key regulatory constraints implemented there: the loan‐to‐value and the debt‐service‐to‐income caps imposed on mortgage borrowers and the minimum capital requirement imposed on banks. Our model is novel in the way it treats the borrowing caps as soft constraints, which makes it easy to analyze multiple non‐redundant borrowing constraints. We also show an estimation strategy that involves a variation of impulse‐response matching and accounts for the lack of historical data concerning the conduct of macroprudential policy, a common problem.