Joachim Jungherr

Institut d'AnÓlisi Econ˛mica
Campus UAB
08193 Bellaterra (Barcelona)

About me:
I am a Post-doc Researcher at the Institut d'AnÓlisi Econ˛mica (IAE-CSIC) in Barcelona (Spain), a Research Fellow at MOVE, and an Affiliated Professor at the Barcelona Graduate School of Economics. I received my PhD from the European University Institute in Florence (Italy). I am co-organizing the Bellaterra Macroeconomics Seminar. A detailed CV can be found here.


Debt Dilution and Debt Overhang
(with Immo Schott)
(New Version: March 2018, submitted)

Barcelona GSE Working Paper 997

We introduce risky long-term debt (and a maturity choice) to a dynamic model of firm financing and production. This allows us to study two distortions which are absent from standard models of short-term debt: (1.) Debt dilution distorts firmsĺ choice of debt which has an indirect effect on investment; (2.) Debt overhang directly distorts investment. In a dynamic model of production, leverage, and debt maturity, we show that the two distortions interact to reduce investment, increase leverage, and increase the default rate. We provide empirical evidence from U.S. firms that is consistent with the model predictions. Debt dilution and debt overhang can overturn standard results: A financial reform which increases investment, employment, output, and welfare in a standard model of short-term debt can have the opposite effect in a model with short-term debt and long-term debt.

The Long-term Debt Accelerator
(with Immo Schott)
(New Version coming soon)

We introduce risky long-term debt to a dynamic model of firm financing and production. This allows us to identify a novel amplification mechanism: the Long-term Debt Accelerator. A negative shock triggers an adverse feedback loop between low investment and high credit spreads. Relative to a frictionless RBC setup, the Long-term Debt Accelerator amplifies shocks by about 150%. This amplification mechanism is absent from a standard short-term debt model. If firms accumulate more debt during a boom (e.g. because of low fundamental volatility), the subsequent recession is more severe. The Long-term Debt Accelerator is in line with the empirically observed counter-cyclical behavior of credit spreads and leverage.

Bank Opacity and Financial Crises
(New Version: February 2018, Revise & Resubmit: Journal of Banking and Finance)

Barcelona GSE Working Paper 882; ADEMU Working Paper 2016/002; Barcelona GSE Focus

This paper studies a model of endogenous bank opacity. Why do banks choose to hide their risk exposure from the public? And should policy makers force banks to be more transparent? In the model, bank opacity is costly because it encourages banks to take on too much risk. But opacity also reduces the incidence of bank runs (for a given level of risk taking). Banks choose to be inefficiently opaque if the composition of their asset holdings is proprietary information. In this case, policy makers can improve upon the market outcome by imposing public disclosure requirements (such as Pillar Three of Basel II). However, full transparency maximizes neither efficiency nor stability. The model can explain why empirically a higher degree of bank competition leads to increased transparency.

A Blessing in Disguise? Market Power and Growth with Financial Frictions
(with David Strauss)
(August 2017)

Barcelona GSE Working Paper 998

Firm market power raises growth in the presence of financial frictions. The reason is that self financing becomes more effective if firm earnings are higher. We test this mechanism using Korean manufacturing data 1963-2003. We find that more concentrated sectors grow faster. This positive empirical relationship between concentration and growth gets weaker as credit becomes more abundant. Using a simple growth model, we study counterfactuals. The observed rise of concentration in Korea until the mid-1970s has increased manufacturing value added 1963-2003 on average by at least 0.6% per year. The effect of firm market power on worker welfare is ambiguous.


I am teaching the second part of the class on Foundations of Equilibrium Analysis in the Macroeconomic Policy and Financial Markets Program of the Barcelona GSE.


Last updated: April 2018