Working Papers
(with Yashvir Gangaram Panday)
This paper studies the impact of the European Central Bank's Corporate Sector Purchase Program (CSPP) on green innovation and environmental performance. We hypothesize that the CSPP reduced the cost of capital for eligible firms, making long-term investments in green innovation more attractive. We first show that eligible firms benefited from the decline in bond yields by increasing their bond volumes and their (bond) debt maturity. The surge in long-term financing enabled them to increase their investment in (green) R&D. As a result, eligible firms were not only able to increase their total patent output relative to ineligible firms, but also their green patent output. In a final step, we show that the eligible firms' investment in green innovation has contributed to actual environmental improvements through a reduction in emissions. Our results are driven by polluting R&D active firms, suggesting that these firms use the cheaper borrowing conditions in an effort to green their business.
Markups and the Asymmetric Pass-Through of Cost Push Shocks (November 2023)
(with Enisse Kharroubi, Deniz Igan, Koji Takahashi, and Egon Zakrajšek)
This paper studies how prices and markups respond to cost push shocks, taking the example of global oil supply shocks. Using sector-level data for the US, we first document a weaker pass-through of global oil shocks to PPI inflation in sectors where firms charge higher markups. However, high markups mainly reduce the pass-through of dis-inflationary oil shocks, while they barely affect that of inflationary oil shocks. Second, using firm-level data, we show that following a dis-inflationary oil shock, high-markup firms are more likely to raise their markup. In addition, they are also more likely to increase their revenues, and hence their profits. Conversely, we find no difference in the response of high- and low-markup firms to inflationary oil shocks. Taken together, these results suggest that high-markup firms draw significant benefits from dis-inflationary oil shocks, as they are able to raise their markups and expand their revenues. They also suggest that high markups provide little cushion against prices pressures stemming from inflationary oil shocks.