Howard Kung

London Business School
Regent's Park, Sussex Place
London NW1 4SA
United Kingdom

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Institutional Affiliation: London Business School

NBER Working Papers and Publications

September 2019Threats to Central Bank Independence: High-Frequency Identification with Twitter
with Francesco Bianchi, Thilo Kind: w26308
This paper presents market-based evidence that President Trump influences expectations about monetary policy. We use tick-by-tick fed funds futures data and a collection of Trump tweets criticizing the conduct of monetary policy and consistently advocating that the Fed lower interest rates. Identification exploits a short time window around the precise timestamp for each tweet. The average effect on the expected fed funds rate is negative and statistically significant, with an average cumulative effect of around -10 bps and a peak of -18.5 bps at the longest horizon. We conclude that market participants do not perceive the Fed as fully independent.
December 2018The Origins and Effects of Macroeconomic Uncertainty
with Francesco Bianchi, Mikhail Tirskikh: w25386
We construct and estimate a dynamic stochastic general equilibrium model that features demand- and supply-side uncertainty. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand-side and supply-side uncertainty imply large contractions in real activity and an increase in term premia, but supply-side uncertainty has larger effects on inflation and investment. We introduce a novel analytical decomposition to illustrate how multiple distinct risk propagation channels account for these differences. Supply and demand uncertainty are strongly correlated in the beginning of our sample, but decouple in the aftermath of the Great Recession.
March 2015The CAPM Strikes Back? An Investment Model with Disasters
with Hang Bai, Kewei Hou, Lu Zhang: w21016
Value stocks are more exposed to disaster risk than growth stocks. Embedding disasters into an investment-based asset pricing model induces strong nonlinearity in the pricing kernel. Our single-factor model reproduces the failure of the CAPM in explaining the value premium in finite samples in which disasters are not materialized, and its relative success in samples in which disasters are materialized. The relation between pre-ranking market betas and average returns is flat in simulations, despite a strong positive relation between true market betas and expected returns. Evidence in the long U.S. sample from 1926 to 2014 lends support to the model’s key predictions.
December 2014Growth, Slowdowns, and Recoveries
with Francesco Bianchi, Gonzalo Morales: w20725
We construct and estimate an endogenous growth model with debt and equity financing frictions to understand the relation between business cycle fluctuations and long-term growth. The presence of spillover effects from R&D imply an endogenous relation between productivity growth and the state of the economy. A large contractionary shock to equity financing in the 2001 recession led to a persistent growth slowdown that was more severe than in the 2008 recession. Equity (debt) financing shocks are more important for explaining R&D (physical) investment. Therefore, these two financing shocks affect the economy over different horizons.

Published: Francesco Bianchi & Howard Kung & Gonzalo Morales, 2018. "Growth, Slowdowns, and Recoveries," Journal of Monetary Economics, . citation courtesy of

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