Credit Crunch in Housing under Regulation Q [Draft]

Abstract: I document the role of a credit crunch in driving the housing market in the 1970s. Binding Regulation Q ceilings tightened funding and induced a credit crunch across the financial sector. I show that the crunch was particularly severe in housing because the primary mortgage lenders, savings and loan associations (S&Ls), lacked the funding flexibility banks had. Banks could substitute rate-capped retail deposits with wholesale funds exempt from the ceiling, whereas S&Ls could not. At the local level, a 1 pp tightening in the effective S&L ceiling is followed over the next year by a 4.7 pp drop in the mortgage growth rate and a 1.1 pp drop in the real house price growth rate. Effects through banks are muted. This mechanism operates alongside demand-side explanations and helps to explain the joint boom-bust patterns in prices and quantities in the housing market during this era.

The Rise of Alternatives [Draft | Internet Appendix | Public Pension Data]

Abstract: Since the 2000s, U.S. public pension funds have actively shifted their risky investments away from public equities and toward alternative assets like private equity and hedge funds—some much more than others. We explore a range of possible explanations for these trends and argue that beliefs about the risk-adjusted return of alternatives have played a central role. Pension beliefs are shaped by investment consultants, peers, and experience in the 1990s. Other demand-side channels related to risk-seeking motives, spending needs, and fund governance have weaker empirical support. We also consider supply-side factors and agency interpretations of the data.

Media coverage: Bloomberg.

Digital Payments and Monetary Policy Transmission [Draft]

Abstract: We examine the impact of digital payments on the transmission of monetary policy by leveraging administrative data on Brazil’s Pix. We find that Pix adoption reduces banks’ market power, making them respond more to changes in policy rates. We estimate a dynamic banking model in which digital payments amplify deposit-demand elasticity. Counterfactuals show that digital payments intensify monetary transmission by reducing banks’ market power—banks respond more to policy-rate changes, and loans decrease more after monetary-policy hikes. The primary channel is deposit market power.

Media coverage: Valor Econômico.

Payment Adoption

Abstract: I study how payment technologies diffuse across households and firms. Using Brazil’s fast-payment system, Pix, I document wide geographic variation in adoption. Adoption by individuals and firms is interdependent. Each group’s uptake responds both to its own momentum and to the other group’s behavior. The interaction between financial sophistication and network externalities drives adoption. This study quantifies the marginal benefit of adding one individual user versus one firm user to the network. To do so, I develop a heterogeneous-agent diffusion model that estimates cross-group spillovers and simulates policy counterfactuals targeting individuals or firms to maximize overall adoption.