Pascal Paul, Economist, Federal Reserve Bank of San Francisco

Pascal Paul

Economist

Macroeconomic Research

Macroeconomics, Financial Economics, Applied Econometrics

pascal.paul (at) sf.frb.org

CV (pdf, 84.27 kb)

Profiles: Personal website

Working Papers
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Banks, Maturity Transformation, and Monetary Policy

2020-07 | February 2020

abstract (+)
Banks engage in maturity transformation and the term premium compensates them for bearing the associated duration risk. Consistent with this view, I show that banks’ net interest margins and term premia have comoved in the United States over the last decades. On monetary policy announcement days, banks’ stock prices fall in response to an increase in expected future short-term interest rates but rise if term premia increase. These effects are reflected in the response of banks’ net interest margins and amplified for institutions with a larger maturity mismatch. The results reveal that banks are not immune to interest rate risk.
The Transmission of Monetary Policy under the Microscope

2020-03 | With Holm and Tischbirek | January 2020

abstract (+)
We investigate the transmission of monetary policy to household consumption using detailed administrative data on the universe of households in Norway. Based on a novel series of identified monetary policy shocks, we estimate the dynamic responses of consumption, income, and saving along the liquid asset distribution of households. We find that low-liquidity but also high-liquidity households show strong responses, interest rate changes faced by borrowers and savers feed into consumption, and indirect effects of monetary policy outweigh direct effects, albeit with a delay. Overall, the results support the importance of financial frictions, cash-flow channels, and heterogeneous effects of monetary policy.
supplement (+)
wp2020-03_high-resolution.pdf – Download PDF with high resolution figures
Historical Patterns of Inequality and Productivity around Financial Crises

2017-23 | March 2020

abstract (+)
To understand the determinants of financial crises, previous research focused on developments closely related to financial markets. In contrast, this paper considers changes originating in the real economy as drivers of financial instability. To this end, I assemble a novel data set of long-run measures of income inequality, productivity, and other macrofinancial indicators for advanced economies. I find that rising top income inequality and low productivity growth are robust predictors of crises, and their slow-moving trend components explain these relations. Moreover, recessions that are preceded by such developments are deeper than recessions without such ex-ante trends.
Published Articles (Refereed Journals and Volumes)
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A Macroeconomic Model with Occasional Financial Crises

Forthcoming in Journal of Economic Dynamics and Control

abstract (+)
Financial crises occur out of prolonged and credit-fueled boom periods and, at times, they are initiated by relatively small shocks that can have large effects. Consistent with these empirical observations, this paper extends a standard macroeconomic model to include financial intermediation, long-term loans, and occasional financial crises. Within this framework, intermediaries raise their lending and leverage in good times, thereby building up financial fragility. Crises typically occur at the end of a prolonged boom, initiated by a moderate adverse shock that triggers a liquidation of existing investment, a contraction in lending, and ultimately a deep and persistent recession
The Time-Varying Effect of Monetary Policy on Asset Prices

Forthcoming in Review of Economics and Statistics

abstract (+)
This paper studies how monetary policy jointly affects asset prices and the real economy in the United States. I develop an estimator that uses high-frequency surprises as a proxy for the structural monetary policy shocks. This is achieved by integrating the surprises into a vector autoregressive model as an exogenous variable. I use current short-term rate surprises because these are least affected by an information effect. When allowing for time-varying model parameters, I find that, compared to the response of output, the reaction of stock and house prices to monetary policy shocks was particularly low before the 2007-09 financial crisis.
FRBSF Publications
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