Published papers

1. Has the ECB’s Monetary Policy Prompted Companies to Invest or Pay Dividends? — Applied Economics, 51 (45), 4920-4938, May 2019 — coauthored with Gómez-Puig, M., and Sosvilla-Rivero, S.;

Abstract: This paper focuses on the influence of the European Central Bank’s (ECB) monetary policies on non-financial firms. It sheds light on non-financial firms’ decisions regarding leverage, and on how the ECB’s conventional and unconventional policies may have affected them. The paper also examines how these policies influenced non-financial firms’ decisions on capital allocation – primarily capital spending and shareholder distribution (for example, dividends and share repurchases). We use an exhaustive and unique dataset comprised of income statements and balance sheets of leading non-financial firms operating in the European Economic and Monetary Union (EMU). The main results suggest that ECB’s monetary policies have encouraged firms to raise their debt burden, especially after the global recession of 2008. Finally, the ECB’s policies, especially after 2011, also seem to have led non-financial firms to allocate more resources not just to capital spending but to shareholder distribution as well.

2. Examining QE’s bang for the Buck: Does Quantitative easing reduce credit and liquidity risks and stimulate real economic activity? — Journal of International Financial Markets, Institutions and Money, June 2022 (working paper, pdf)

Abstract: This paper investigates the ECB’s Corporate Sector Purchase Programme’s (CSPP) impact on European corporate bonds’ credit and liquidity risks and real economic activity. The results show that the CSPP’s announcement (“stock effect”) lowered the credit spread of eligible corporate bonds, measured by the G-spread, by ten basis points (bps) or 9.8%. The liquidity of eligible bonds also improved as their scaled bid-ask spread decreased by 2.6 bps or 4.6%. Moreover, for every 1 billion euros of ECB corporate bond monthly purchases (“flow effect”), the scaled bid-ask spread of eligible bonds declined by 0.6 bp from June 2016 to December 2018. As for economic activity, QE’s stock effect raised corporate debt – mainly for German firms – and the stock and flow effects stimulated dividend spending, especially for German and French firms. These results indicate that QE initially improved corporate bond operations and encouraged borrowing. Moreover, the CSPP continued to boost the liquidity of corporate bonds and dividend expenditure throughout its implementation, but not investment. Therefore, QE had limited success in stimulating economic activity.

Working papers

3. The ECB QE’s Impact on Corporate Credit Risk: A Cross-Market Analysis of CDS, Equities, and Bonds (available upon request)

4. Lessons from the Bank of Japan’s Corporate Equities Purchase Program (available upon request)

5. Measuring the Effect of the ECB’s Quantitative Easing on Corporate Credit Risk –coauthored with Gómez-Puig, M., and Sosvilla-Rivero, S.(available upon request)

Work in progress

6. A Tale of Two Central Banks: How Did the Federal Reserve and ECB’s Policy Response to the Covid-19 Crisis Affected Corporate Equity and Debt Risk and Liquidity – coauthored with Itai Furman

7. On the Relationship between Monetary Policy and Inequality;

8. Secular Stagnation or Dividend Boom: How do Firms Decide between Investment and Dividend at the Zero-lower Bound?

9. Examining the Oil Market Crash of 2020 and its Ripple Effect on Financial Markets.

10. Let’s Get Fiscal (Stimulus)! How Does Fiscal Stimulus Support the Transmission Mechanism of Monetary Policy?