Paul Woolley Scholar,
Financial Markets Group,
London School of Econonomics (LSE),
Houghton Street,
London WC2A 2AE,
United Kindom
Email: c.t.ungerer(at)lse.ac.uk
Tel: (+44) 782 435 9121
I am a Paul Woolley Scholar in the LSE Financial Markets Group and a PhD candidate in the LSE Department of Economics.
The classical treatment of market transactions in Economics presumes that buyers and sellers engage in transactions instantly and at no cost. In a series of applications in the housing market, the labor market and the market for corporate bonds, my thesis research shows that relaxing this assumption has important implications for Macroeconomics and Finance.
Monetary Policy, Hot Housing Markets And Household Debt
This paper uses theory and empirical evidence to explore a mechanism through which expansionary monetary policy causes a rise in household leverage. Low mortgage rates encourage buyers to enter the housing market and raise the housing sales rate. Since lenders can resell seized foreclosure inventory at lower cost in a hot housing market, ex-ante they feel comfortable financing a larger fraction of the house purchase. More generally, this mechanism suggests that measures to stimulate housing liquidity, including monetary policy alternatives such as home buyer tax credits, are key to stimulating access to credit.
When Do Temporary Payroll Tax Cuts Work? The Role Of Hiring And Firing Costs
Conventional wisdom suggests that fiscal policy is most effective in creating jobs during recessions. Unemployment is high and firms can hire without driving up wages. This paper uses simulations of an economy with heterogeneous firms to show that labor adjustment costs put this logic into question. To avoid firing and eventual re-hiring of workers, firms hoard labor during downturns and this makes their hiring decision less sensitive to marginal tax incentives. In a heterogeneous sector economy, the interplay between these two forces (slack labor markets and slack inside the firm) plausibly generates countercyclical fiscal multipliers when targeted at low-adjustment-cost sectors (such as government spending on construction), but procyclical multipliers for broad-based employer payroll tax cuts.
Trader Loss Aversion And Career Concerns
This paper proposes a theory in which career concerns make rational profit-maximizing traders reluctant to sell positions that are trading at a loss. No underlying behavioural bias (such as loss averse preferences) is postulated. Because skilled traders have superior information on asset resale markets, they are unlikely to enter trades that they are eventually forced to close at a loss. This establishes the number of loss-making trades as key criterion in the trader retention decision of financial institutions. In response, skilled and unskilled traders avoid realizing losses. Transactions data from corporate bond dealers offers evidence consistent with this career concerns theory of loss aversion. The paper concludes by discussing implications of this theory for empirical and theoretical work on loss averse preferences as well as for optimal management practice on the trading floor.