Research

Working Papers

This paper evaluates the aggregate effects of financial frictions in the presence of debt tax shields. Previous studies indicate that removing financial frictions will stimulate investment and reduce misallocation. However, with the tax bias of debt over equity, I show that the macroeconomic implications of financial frictions can be different.

Through the lens of a dynamic stochastic general equilibrium model of investment with heterogeneous firms, I show that while a small tax shield may mitigate misallocation, a large tax shield with loose financial constraints can exacerbate the aggregate cost of financial frictions and the misallocation of capital.

My counterfactual experiments demonstrate that by removing financial frictions, aggregate capital increases by 10%, output increases by 3%, and welfare grows by 2%. Aggregate gains can be 10 times larger when accounting for the tax shield. My results speak to recent tax policy reforms and concerns about high levels of corporate debt in advanced economies.

  • The Survival of Zombie Firms: Evidence from the European Sovereign Debt Crisis

Draft coming soon!

It is generally agreed that an efficient economy should feature a productivity-enhancing reallocation where resources are shifted to high-productivity firms and inefficient firms are scrapped. However, recent studies document an increasing number of economically-unviable firms (“zombie firms”).

To explain the prevalence, I focus on the role of credit and forbearance rescue policies, supervisory, and bank lending in a sovereign-bank-corporate nexus and construct a simple, analytical model where poorly-designed policies can induce under-capitalized banks to roll over loans to low-productivity firms and hence keep zombies firms afloat.
Using large-scale cross-country European firm-level data from 2010 to 2014, my empirical results are consistent with the model implication of a significantly reduced exit response of low-productivity firms, indicating the existence of zombie firms in the economy. My work implies that policies that are frequently used during a financial crisis, such as tightened capital requirements and bank bailouts, distort credit allocation, and hamper aggregate productivity. It highlights the importance of targeted policies and bank supervision in crises.

Research Report

Boston University Initiative on Cities Research Reports, 2022

Based on in-depth, structured, qualitative interviews with leaders across 30 nonprofits, community-based organizations, city agencies, and others, this report seeks to 1) reveal the strengths and weaknesses of Boston’s ecosystem of small business advocates, funders, and technical assistance providers, 2) capture their views on the challenges confronting our region’s Black, Indigenous, and people of color (BIPOC) small business owners and entrepreneurs, and 3) collect their ideas for changes in the future.

Work in Progress

  • Firm Indebtedness and Increased M&A
  • Foreign Competition, Innovation, and Supply Chain