NewBank Information Production Over the Business Cycle 18 December 2025 Cooper Howes and Gregory WeitznerThe information banks produce drives their lending decisions and macroeconomic outcomes, but this information is inherently difficult to analyze because it is private. We construct a novel measure of bank information quality from confidential regulatory data that include banks’ private risk assessments for US corporate loans.
NewInflation risk and the finance-growth nexus 18 December 2025 Alexandre Corhay and Jincheng TongWhen firms finance using long-term nominal debt issued by financial intermediaries, changes in expected inflation lead to a wealth transfer across sectors. Higher expected inflation decreases firms’ real liabilities and default risk, which helps reduce debt overhang. However, it hurts intermediaries’ real assets, leading to a contraction in credit supply.
NewDevaluations, Deposit Dollarization, and Household Heterogeneity 18 December 2025 Francesco Ferrante and Nils GornemannWe study the aggregate and redistributive effects of currency devaluations in a small open economy model with leverage-constrained banks and heterogeneous households. Our framework captures three stylized facts about financial dollarization in emerging economies: i) a sizable share of domestic deposits is denominated in foreign currency; ii) these deposits represent significant foreign currency liabilities for local banks; and iii) dollar deposits are mainly held by wealthier households.
NewCostly Multidimensional Screening 16 December 2025 Frank YangA screening instrument is costly if it is socially wasteful and productive otherwise. A principal screens an agent with multidimensional private information and quasilinear preferences that are additively separable across two components: a one-dimensional productive component and a multidimensional costly component. Can the principal improve upon simple one-dimensional mechanisms by also using the costly instruments?
NewThe Economics of Equilibrium with Indivisible Goods 16 December 2025 Ravi Jagadeesan and Alexander TeytelboymThis paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely between goods themselves.
NewBridges 16 December 2025 Anna TompsettBridges are critical but sparse links in land transport networks. I exploit quasi-experimental variation in bridge construction over major rivers in the United States to measure the causal effects of land transport infrastructure. Bridges are more often built upstream than downstream of tributary confluences—where smaller rivers join larger rivers—generating local differences in connectivity. These local connectivity advantages have negative effects on per capita income.
NewA Robust Test for Weak Instruments for 2SLS with Multiple Endogenous Regressors 12 December 2025 Daniel J. Lewis and Karel MertensWe develop a test for instrument strength based on the bias of two-stage least squares (2SLS) that (1) generalizes the tests of Stock and Yogo (2005) and Sanderson and Windmeijer (2016) to be robust to heteroskedasticity and autocorrelation, and (2) extends the Montiel Olea and Pflueger (2013) robust test for models with a single endogenous regressor to multiple endogenous regressors.
NewLatent Heterogeneity in the Marginal Propensity to Consume 1 December 2025 Daniel Lewis, Davide Melcangi, and Laura PilossophWe estimate the unconditional distribution of the marginal propensity to consume (MPC) using clustering regression applied to the 2008 economic stimulus payments. By deviating from the standard approach of estimating MPC heterogeneity using interactions with observables, we can recover the full distribution of MPCs.
