Research

Detected misreporting triggers stock-price declines, reputational damage, and monetary sanctions, yet misreporting persists. We develop and estimate a dynamic heterogeneous-firm model in which managers inflate reported profits to lower the cost of external finance, at the risk of detection and the loss of access to manipulation. Estimated on U.S. firm-level data, each one-percentage-point increase in reported profitability lowers the per-unit cost of external finance by 1.8%; the directly punitive components of detection are quantitatively small. Almost the entire cost of being flagged operates through two channels: the firm cannot use misreporting to soften its financing wedge, and the wedge is priced off true rather than inflated profits. Prohibiting misreporting reduces shareholder value by 3.1%, of which two-thirds reflect the option value of the channel.

Presented at University of Exeter, Federal Reserve Bank of Kansas City, University of Lausanne/EPFL, Study Center Gerzensee, Paris December Finance Meeting (scheduled), FMA Europe (2026).

Maturity walls occur when most of a firm's debt comes due within a short window of one to two years, raising rollover risk. Yet 48% of non-financial bond issuers have one. I introduce a continuous measure of repayment concentration and show that, beyond leverage and average maturity, walls are associated with higher default risk and credit spreads. I develop and estimate a dynamic model in which firms jointly choose the level and concentration of their debt, trading the fixed cost of bond-market access against rollover risk. In the model, firms with low rollover risk are the ones that concentrate their debt, and the rollover exposure a wall creates is priced. Walls raise credit spreads by 36 bps (21%) and default rates by 30 bps (25%), and in the model cheaper issuance can make firms riskier rather than safer. Firms with walls are also far less resilient to a credit-market freeze, an exposure that models ignoring maturity concentration understate by up to 60%.

Presented at OFR, Boston Fed, JCT, Federal Reserve Board, CBO, London School of Economics, HEC Montréal, Nova SBE, Andersen Institute, Study Center Gerzensee, Northern Finance Association (scheduled), DSE Dynamic Finance and Banking Conference, Aarhus Finance Forum, SED (2026), BSE Summer Forum (2026), FMA Europe (2026), North America Summer Meeting Econometric Society (2026), Young Swiss Economists Meeting (2026), ASSA (2026), European Winter Meeting Econometric Society (2025), RCF–ECGI Corporate Finance and Governance Conference (2025), Midwest Macro Meeting (Winter 2025), Econometric Society World Congress (2025), 20th Annual Finance Conference Washington University in St. Louis (PhD poster session), Midwest Economic Association (2024).

We revisit the effect of government spending on corporate investment. Employing a narrative approach to identify exogenous variation in government expenditures (Ramey, 2011b; Ramey and Zubairy, 2018), we find that a one-percentage-point increase in military spending news, as a share of GDP, raises capital expenditures of publicly listed US firms by more than one percent over five years. The investment response is not driven by contractors with the Department of Defense, financial constraints, unconventional monetary policy, or geopolitical and economic uncertainty. Instead, we show that news about military spending lowers long-term nominal and ex-ante real interest rates on impact, with effects persisting for up to five years after the shock. Lower interest rates critically translate into a decline in the firm-level cost of capital, particularly the cost of debt. Consistent with the decline in the cost of capital, firms expand debt holdings and investment.

Presented at Brazilian Finance Meeting, University of Wisconsin–Madison Macro Workshop, the University of Wisconsin–University of Minnesota Workshop.

This paper explores how the distribution of default risk impacts the transmission of monetary policy to aggregate investment. In contractions, the distribution of firm default risk shifts, as firms become more likely to default on their debt obligations. I show both empirically and in a model that this shift in the distribution creates a state dependence in the transmission of monetary policy to aggregate investment: aggregate investment is less responsive to changes in interest rates in contractions. In both the data and my model, firms that are at high risk of default are responsible for driving this state dependent transmission because a decrease in interest rates does not pass through to the interest rates they face on issuing new debt. Thus, high default risk firms can't afford to issue new debt to finance additional investment at favorable enough interest rates. Quantitatively, I estimate that the decreased transmission of monetary policy to aggregate investment is large due to the fact that more firms become risky in contractions. In contractions, aggregate investment is between 1 - 2 percent less responsive to a 25 bps expansionary monetary policy shock.

Presented at University of Wisconsin–Madison Macro Workshop, Study Center Gerzensee.

We analyze the so-called deflationary equilibrium of the New Keynesian model with an interest rate lower bound when the future course of the economy is uncertain. We find that, in the deflationary equilibrium, the rate of inflation is higher at the risky steady state—which takes uncertainty into account—than at the deterministic steady state—which abstracts from uncertainty. The rate of inflation at the risky steady state can be positive if the central bank's inflation target is positive. Our theory is consistent with the Japanese experience in the 2010s when the rate of inflation was on average positive while the interest rate lower bound was binding.

Presented at Bank of Japan, the Summer Workshop on Economic Theory, the University of Tokyo.

In expectations-driven liquidity traps, a higher inflation target is associated with lower inflation and consumption. As a result, introducing the possibility of expectations-driven liquidity traps to an otherwise standard model lowers the optimal inflation target. Using a calibrated New Keynesian model with an effective lower bound (ELB) constraint on nominal interest rates, we find that even a very small probability of falling into an expectations-driven liquidity trap lowers the optimal inflation target nontrivially. Our analysis provides a novel reason to be cautious about the argument that central banks should raise their inflation targets in light of a higher likelihood of hitting the ELB.