Amir Kermani | Clausen Center

Amir Kermani

Assistant Professor

Department of Economics and Haas School of Business

Amir Kermani holds joint positions as assistant professor at the Haas School of Business and Department of Economics at the University of California Berkeley. His research interests include monetary policy, macroeconomics and housing, market securitization and political economy. Before joining UC Berkeley in 2013, he received his PhD from MIT.

Summary of recent papers

Unemployment Insurance as an Automatic Stabilizer: The Financial Channel

Coauthor: Marco Di Maggio (HBS)

Date: May 2017

Citation: Harvard Business School Finance Working Paper Forthcoming

This paper assesses the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks. Using an empirical design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%. Consistent with the demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits. Furthermore, a financial channel is a key underlying driver of the aggregate demand's response to negative shocks. We find that households' delinquencies on their financial obligations are less sensitive to negative employment shocks, whenever UI is more generous, which reduces banks' incentive to tighten credit standards in response to negative shocks. Thus, the financial accelerator is dampened by having a more generous UI. This mechanism also reduces the sensitivity of house prices to negative shocks, in particular, in less elastic regions.

 

How Quantitative Easing Works: Evidence on the Refinancing Channel

Coauthors: Marco Di Maggio (HBS), Christopher Palmer (MIT Sloan)

Date: December 2016

Citation: Columbia Business School Research Paper No. 16-1

Despite massive large-scale asset purchases (LSAPs) by central banks around the world since the global financial crisis, there is a lack of empirical evidence on whether and how these programs affect the real economy. Using rich borrower-linked mortgage-market data, this paper documents that there is a “flypaper effect” of LSAPs, where the transmission of unconventional monetary policy to interest rates and (more importantly) origination volumes depends crucially on the assets purchased and degree of segmentation in the market. For example, QE1, which involved significant purchases of GSE-guaranteed mortgages, increased GSE-eligible mortgage originations significantly more than the origination of GSE-ineligible mortgages. In contrast, QE2's focus on purchasing Treasuries did not have such differential effects. We find that the Fed's purchase of MBS (rather than exclusively Treasuries) during QE1 resulted in an additional $600 billion of refinancing, substantially reducing interest payments for refinancing households, leading to a boom in equity extraction, and increasing consumption by an additional $76 billion. This de facto allocation of credit across mortgage market segments, combined with sharp bunching around GSE eligibility cutoffs, establishes an important complementarity between monetary policy and macroprudential housing policy. Counterfactual simulations estimate that relaxing GSE eligibility requirements would have significantly increased refinancing activity in response to QE1, including a 20% increase in equity extraction by households. Overall, these results imply that central banks could most effectively provide unconventional monetary stimulus by supporting the origination of debt that would not be originated otherwise. 

Clausen-Supported Research