I am a Lecturer (Assistant Professor) at the Hebrew University of Jerusalem Economics department.
My research interests include international finance and macroeconomics.
Research
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The Health Channel of Business Cycles
Abstract
We document that economic contractions causally worsen health among working-age adults and that poor health predicts negative labor market outcomes. These findings reveal a health channel of business cycles. To quantify its magnitude, we build a dynamic general equilibrium model with incomplete markets where agents differ in their health, labor productivity, and wealth. The health channel captures the two-way feedback between pure health shocks, which raise the risk of downward health transitions, and other aggregate shocks, namely demand and productivity. Our novel estimation strategy identifies the shock correlations, pinning down the health channel. We find the health channel accounts for 14 percent of employment variance over the cycle and 11 percent of the employment decline in the Global Financial Crisis.
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Corner Solutions in Investment Decisions: Theory and Experimental Evidence
Abstract
Many small businesses decline to invest even when credit is available and expected payoffs are high. We show that when investment raises a project's probability of success, rather than the payoff conditional on success, risk-averse entrepreneurs can rationally choose corner solutions: zero investment or high investment. This result follows from risk aversion and the probability technology alone; it does not require fixed costs, technological non-convexities, behavioral biases, or binding credit constraints. Under CARA utility, expected utility is U-shaped (quasi-convex) in investment. Competitive lending does not mechanically eliminate non-participation: when failure-state proceeds are pledgeable, debt exposes the entrepreneur to downside repayment, while risk-sharing contracts can raise take-up by reducing that exposure. An incentivized experiment with 846 Czech citizens supports the theory: investment choices are bimodal when investment affects success probability but unimodal when investment scales payoffs conditional on success.
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Creator Communication and Trading in NFT Markets: Evidence from a Marketplace Policy Change
Abstract
NFT project creators both inform investors and collect proportional fees on every secondary-market trade. Between 2022 and 2023, platform competition progressively eliminated mandatory creator fees. Using weekly panel data for NFT collections on Ethereum and Solana, we show that creator tweets predict trading volume, primarily through transaction counts rather than prices, and that this link attenuated when fee enforcement weakened, with larger declines for higher-fee collections. We develop a noisy rational-expectations model with heterogeneous interpretation of public signals to compare two creator-compensation schemes: per-trade royalties and revenue-equivalent upfront membership fees. Idiosyncratic interpretation noise causes more precise communication to widen belief dispersion rather than compress it, while proportional fees create inaction thresholds that amplify the effect of disagreement on volume. Under royalties, creators back-load disclosure to stimulate trades; under membership fees, they front-load it to resolve uncertainty. The welfare comparison shows that the membership scheme dominates: it eliminates per-trade distortions, and under early-resolution-of-uncertainty preferences the shift in disclosure timing provides an additional welfare gain.
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All Eggs in One Basket: When Diversification Increases Portfolio Risk?
Abstract
We show that when investment increases a project's probability of success, rather than its payoff conditional on success, diversifying a fixed budget across uncorrelated projects increases overall portfolio risk. We apply this finding to venture capital, hypothesizing that risk-averse managers limit diversification to mitigate this risk. We propose a testable prediction that distinguishes our hypothesis from the conventional one without requiring direct measurement of portfolio risk. Existing empirical evidence, by and large, is consistent with our hypothesis.
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Cond. Accepted at JBES Non-linear Dynamic Factor Models for Financial and Macroeconomic Applications
Abstract
Through the lens of a nonlinear dynamic factor model, we study the role of exogenous shocks and internal propagation forces in driving the fluctuations of macroeconomic and financial data. The proposed model 1) allows for nonlinear dynamics in the state and measurement equations; 2) can generate asymmetric, state-dependent, and size-dependent responses of observables to shocks; and 3) can produce time-varying volatility and asymmetric tail risks in predictive distributions. We find evidence in favor of nonlinear dynamics in two important US applications. The first uses interest rate data to extract a factor allowing for an effective lower bound and nonlinear dynamics. Our estimated factor coheres well with the historical narrative of monetary policy, and we find that allowing for an effective lower bound constraint is crucial. The second recovers a credit cycle. The nonlinear component of the factor boosts credit growth in boom times while hindering its recovery post-crisis. Shocks in a credit-crunch period are more amplified and persist for longer compared with shocks during a credit boom.
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Sovereign Default Risk and Foreign Currency Returns
Abstract
Many currencies exhibit non-zero average returns with respect to the US dollar, in an apparent violation of textbook uncovered and covered interest parities. I first show that in the cross-section of countries foreign currency returns are positively related to sovereign default risk, and then reconcile this finding with the standard theory via the "peso problem." Market players collect a premium for bearing the risk of sharp devaluation in case of default. Since defaults are rare in the data, default premium manifests itself in higher currency returns. To formalize the link between default risk and currency returns, I discipline quantitatively a model with default based on Arellano (2008) for a set of developing countries. I then use the implications of this model to construct an econometric model for the cross-section of currency returns that I estimate using the extended Fama and MacBeth (1973) method. I find strong evidence supporting the "peso problem" explanation: credit default swap spreads, serving as a proxy for default risk, explain around 25% of the cross-country variation of average currency returns.
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Some Apples Fall Far: Skill Premium, Housing and the Rising Price-to-Rent Ratio