Publications
Credit Supply Shocks and Prices: Evidence from Danish Firms, with Gabriel Züllig. American Economic Journal: Macroeconomics (2024), Vol. 16, No. 2, pp. 1-28.Abstract: We study the response of firms’ output prices to a cut in credit supply. We combine data on loans between Danish firms and banks with survey-based producer prices and transaction-based export unit values. Exploiting banks’ heterogeneous exposure to the global financial crisis, we show that loans to firms with relationships to exposed banks drop and lending rates increase. In response, firms raise prices by 3–5%. This effect is decreasing in the elasticity of firms’ demand but positive for most industrial production. Our results support the idea that firms use price increases to raise cash when external sources of liquidity dry up.
The Pass-Through of Minimum Wages into US Retail Prices: Evidence from Supermarket Scanner data, with Claire Montialoux and Michael Siegenthaler. The Review of Economics and Statistics (2022), Vol. 104, No. 5, pp. 890-908.Abstract: This paper estimates the pass-through of minimum wage increases into the prices of U.S. grocery and drug stores. We use high-frequency scanner data and leverage a large number of state-level increases in minimum wages between 2001 and 2012. We find that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices. We show that price adjustments occur mostly in the three months following the passage of minimum wage legislation rather than after implementation, suggesting that pricing of groceries is forward-looking.
Coverage: Marginal Revolution, National Affairs Findings Blog, Brad Delong
Working Papers
Financial Frictions: Micro vs Macro Volatility, with Renato Faccini, Seungcheol Lee, Ralph Luetticke and Morten Ravn. January 2024. Revise and Resubmit at American Economic ReviewAbstract: Consumer credit spreads significantly impact consumption and asset dynamics, affecting indebted households' spending behavior and the income sensitivity of consumption. Analyzing Danish data, we find that elevated credit spreads reduce consumption of indebted households. Our results suggest that the marginal propensity to consume (MPC) is countercyclical, with credit spreads playing a crucial role. We develop a HANK model, incorporating bank financing for both firms and households. Agency frictions generate a countercyclical credit spread, which induces heterogeneous incidence of aggregate shocks consistent with the data. Banking regulation, while stabilizing at the aggregate level, may induce volatility at the household level.
Markups over the Firm Life Cycle, with Klaus Adam and Gabriel Züllig. November 2023.Abstract: We estimate the dynamics of relative markups, marginal costs and prices over the firm life cycle using detailed firm data from Denmark. Marginal costs fall by about 20% over the first 15 years of firms' life, while prices fall only weakly by about 5%, resulting in a 15pp increase in markups. About one third of the decrease in marginal cost over the firm age is explained by movements in productivity, with the remainder being due to non-homotheticities and increasing returns in the production function. We show that markups increase following the introduction of new products and the discontinuation of old products, suggesting that product turnover is important driver of markup dynamics at the firm level.
Firm Dynamics and the Rise in Danish Firms' Cash Holdings, with Simone Bonin. August 2022. Updated draft coming soonAbstract: We study cash holdings in the full population of Danish firms 2003–2018 and document a large and persistent increase in cash holdings after the Global Financial Crisis. This increase is driven by small and medium-sized firms, who are usually not covered in datasets used in the existing literature. Cash holdings of larger firms are stable and much lower than those of larger public firms in the U.S. We show that firm entry and exit dynamics among small firms account for essentially all of the rise in cash holdings. We document correlations of cash holdings with firm characteristics in the full population of firms, that are consistent with the those found for larger public firms. Changes in persistent characteristics of entering firms, such as size or industry, cannot explain the development of cash holdings. Rather, the increase is explained by a fall in bank borrowing among entering firms. Our results document the important role of credit for firms cash holdings, and suggest that post-crisis developments in credit markets drive both borrowing and cash holding decisions.
Work in Progress
Prices and Demand Shocks: Micro Evidence and Aggregate Implications, with Christian Hoeck. Markups and Monetary Policy: Evidence from Denmark, with Luca Riva. Negative Interest Rate Policies: The Role of Pass-Through to Deposit Rates, with Anders Yding. Investment after export demand shocks, with Anders Yding.Policy Publications
Inflation Inequality in Denmark, with Andreas Kuchler and Christoffer Weissert. June 2023. Danmarks Nationalbank Economic Memo No. 5Coverage: Berlingske, Politiken
The Rise in Cash Holdings of Danish Companies, with Simone Maria Bonin. August 2022. Danmarks Nationalbank Economic Memo No. 8 Liquidity Reserves of Danish Firms: Implications during the COVID-19 Epidemic. June 2020. Danmarks Nationalbank Economic Memo No. 2 Labor Cost Pass-through to Producer Prices in Denmark, with Simon Juul Hvid. December 2020. Danmarks Nationalbank Working Paper No. 166 Manufacturing Prices and Employment after the Swiss Franc Shock, with Daniel Kaufmann. October 2017. Study on behalf of the Swiss State Secretariat for Economic Affairs SECO