Vladimir Yankov

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Working papers
Liquidity Coinsurance in Syndicated Loan Markets
(joint with Filip Zikes and Kevin Kiernan), under revision for the Journal of Finance
[ Slides ] [ Replication code ] [ Appendix ]

We develop a simple model of the liquidity and insurance capacity of the interbank network arising from loan syndication. We find that the liquidity capacity has increased significantly following the introduction of liquidity regulation, and that the liquidity co-insurance is economically important for the corporate sector. We also find that borrowers with higher reliance on credit lines have become more likely to obtain credit lines from syndicates with higher liquidity capacities. The increase in liquidity capacities and the assortative matching on liquidity characteristics has strengthened the importance of large banks as liquidity providers to the corporate sector.

The Collateral Channel and Bank Credit
(joint with Arun Gupta and Horacio Sapriza),under revision for the Journal of Financial Economics
[ Slides ] [ Replication code ] [ Appendix ]

We identify the firm-level and aggregate effects of the collateral channel using detailed bank-firm-loan level data that allow us to observe the pledging of real estate collateral and to control for credit demand and supply conditions. At the firm level, a 1 percent increase in collateral values leads to a 12 bps higher credit growth, whereas, in the cross-section of MSAs, the average elasticity of credit to collateral values is 7 times larger. Our estimates imply that as much as 37 percent of employment growth over the period from 2013 to 2019 can be attributed to the relaxation of borrowing constraints at bank-dependent borrowers.

Collateral Heterogeneity and Credit Market Frictions
(joint with Marios Karabarbounis, Patrick Macnamara, and Horacio Sapriza), in preparation
[ Slides ] [ Replication code ] [ Appendix ]

While the distinction between firm borrowing by pledging physical assets and firm borrowing by pledging future cash flows is becoming central in recent macro-finance studies, there is little work making this distinction within quantitative models of firm financing. We build a structural model with heterogeneous firms that optimally choose between asset-based or cash-flow-based debt. We show that the choice of collateral type is important to evaluate the overall impact of credit market frictions. We discipline the model with U.S. bank-firm-loan level administrative data, which provide detailed information on the type of collateral pledged across the firm size distribution including both public and private firms. We find that low-productivity firms prefer to pledge their assets, because the ongoing value of the firm is small, while more productive firms with expected large future cash flows are better off pledging their future cash-flow as collateral. This result has sharp implications for the effect of financial frictions on real outcomes: standard financial shocks such as credit tightening from declines in asset prices have smaller effects in our framework, because they affect smaller and mainly unproductive firms.

Rewiring repo
(joint with Jin-Wook Chang, and Elizabeth Klee) , in preparation
[ Slides ] [ Replication code ] [ Appendix ]

We study the structure and efficiency of the repurchase agreement (repo) market in allocating cash and collateral across two segments. The first segment is a decentralized tri-party repo market characterized by established and persistent long-term relationships between dealers (borrowers) and cash lenders. The second segment is a centrally-cleared interdealer market that reallocates excess cash borrowed in the decentralized market to dealers with cash deficits. We develop a model of a networked repo market with strategic interactions among dealers who compete for funding from a limited pool of cash allocated across different lenders. The model allows us to disentangle supply and demand factors that determine the clearing of excess demand for cash in the centralized market. We estimate the supply and demand factors along with the supply and demand elasticities for cash and collateral. We determine conditions under which the market could become unstable as a result of competition among dealers and capacity constraints of lenders. Our results are important in designing efficient market interventions to stabilize the market as well as in understanding how monetary policy tools such as the ON RRP facility affect the market.

In Search of a Risk-Free Asset
Journal of Money Banking and Credit, March 2023
Slides ] [ Appendix ] [Replication code ]

I examine the role of costly consumer search for the pricing of deposits. Estimates of a model of heterogeneous search cost households reveal a large fraction of high-search-cost depositors composed of elderly and less financially sophisticated households. Those households grant banks significant monopoly power that results in low and asymmetric interest rate pass-through. The predictions of the estimated model are consistent with responses in the Survey of Consumer Finances to questions related to financial sophistication, search for investment return, and deposit allocations across multiple bank accounts. The estimated model also reveals a non-monotone relationship between bank entry, deposit rates, and consumer surplus.

Limited Deposit Insurance Coverage and Bank Competition (first draft 2014) [ Slides ] [Replication code ]
(joint with Oz Shy and Rune Stenbacka ), Journal of Banking and Finance, Volume 71, October 2016, Pages 95-108

Deposit insurance schemes in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks. We compare three regimes of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces consumer welfare as well as total welfare relative to no or unlimited deposit insurance.

Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets
(joint with Simon Gilchrist and Egon Zakrajsek ), Journal of Monetary Economics, Elsevier, vol. 56(4), pages 471-493, May 2009. [ScienceDirect] [Replication code ]
In the Press: Wall Street Journal .

To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondary bond prices on outstanding senior unsecured debt issued by a large panel of nonfinancial firms. An advantage of our ``ground-up'' approach is that we are able to construct matched portfolios of equity returns, which allows us to examine the information content of bond spreads that is orthogonal to the information contained in stock prices of the same set of firms, as well as in macroeconomic variables measuring economic activity, inflation, interest rates, and other financial indicators. Our portfolio-based bond spreads contain substantial predictive power for economic activity and outperform - especially at longer horizons - standard default-risk indicators. Much of the predictive power of bond spreads for economic activity is embedded in securities issued by intermediate-risk rather than high-risk firms. According to impulse responses from a structural factor-augmented vector autoregression, unexpected increases in bond spreads cause large and persistent contractions in economic activity. Indeed, shocks emanating from the corporate bond market account for more than 30 percent of the forecast error variance in economic activity at the two-to four-year horizon. Overall, our results imply that credit market shocks have contributed significantly to U.S. economic fluctuations during the 1990--2008 period.

Essays on Banking, Finance and Macroeconomics, Ph.D Dissertation 2013, Boston University
Endogenous Organizational Structure and Internal Allocation of Capital in Banking
(joint with Tszkin Julian Chan and Ben Craig ), under major revision
[ Slides ] [ Replication code ]

We document that large US bank holding companies have organizational structures composed of a large number of individual subsidiaries with different geographic or functional specialization. Moreover, and much less known, the organizational structures across different holding companies vary in their network characteristics. We combine information from the organizational structure of bank holding companies with data from the balance sheets and income statements of the holding company bank and non-bank subsidiaries to construct a unique dataset of the internal allocation of funds within a conglomerate. We document that these internal capital flows are sizeable and increase with the cost of external funding. Furthermore, banks within a conglomerate with higher centrality in the organizational network receive disproportionally higher funding controlling for profitability and investment opportunities. We also show that previous research on the internal allocation of capital in banking, which did not control for the network structure and the endogeneity of organizational structure of bank holding companies, significantly underestimates the role of the internal capital markets.

Liquidity Regulation and Corporate Liquidity Management [ Short description ]

Disclaimer The views expressed herein are those of the author and do not necessarily represent the offical position of the Board of Governors of the Federal Reserve System.

  Last update: November, 2023
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