Pierluca Pannella

I am a PhD candidate in Economics at the University of British Columbia, and I will be on the 2016/17 job market. I will be available for interviews at the CEEE (Toronto, December 2016) and the ASSA (Chicago, January 2017).

My research fields are Macroeconomics and Finance, with a particular interest in credit cycles and financial bubbles.

Job Market Paper

Abstract: Why are bubbles harmful to the economy? According to a recent literature on rational bubbles, the problem is that they burst, triggering a recession. This paper proposes a theory of rational bubbles where the boom, not the ensuing bust, induces a recession by promoting a misallocation of factors. As in recent literature, financial markets are imperfect and the rise of a bubble expands credit and boosts capital accumulation. However, capital accumulation occurs in unproductive sectors and aggregate output is reduced. The result is driven by the fact that borrowers with different productivity levels have an advantage with respect to issuing different types of debt contracts. In normal times, High-productive borrowers have higher collateral and thereby attract most of the funds. In bubbly times, borrowers can also issue “bubbly debt,” a debt that is repaid with future debt. The possibility to roll-over and raise bubbly debt depends on the probability of surviving in the market. Assuming that high productive projects are also fundamentally riskier, a bubble, then, misallocates resources towards investors with lower expected returns. The theory is motivated by evidence on between-industry misallocation in the years preceding the 2008 financial crisis.

[Go to paper]

Working Paper

Abstract: Financial constraints play a relevant role in shaping the selection into entrepreneurship. The US housing bubble preceding the 2008 crisis, sharply altered the relative importance of different sources of funding: a surge in mortgage credit was not followed by a similar increase in equity financing. In this paper we investigate how the housing boom has changed the composition of entrepreneurs in terms of wealth and quality. We use city level house prices data combined with individual level information on wealth, occupational choice and other personal characteristics, to test different hypothesis on the relation between finance and entrepreneurship.

Work in Progress

Abstract: I test theories of liquidity creation and financial bubbles on American banks’ balance sheet and income statement data. I show that the rise in short-term debt that preceded the 2008 crisis was not only associated with a process of liquidity transformation. In particular, I claim that a bubble scheme on banks’ liabilities may alternatively explain the boom-and-bust debt cycle.

Nominal Rational Bubbles: the Short and Long Run Effects

Teaching Assistant Positions at UBC:

  • ECON 356 Introduction to International Finance
  • ECON 502 Macroeconomics
  • ECON 546 Monetary Theory and Policy
  • ECON 556 International Finance