Peter Paz

Welcome to my website. I am a PhD Candidate in Economics at New York University.

Research Interests:

  • Fields: Macroeconomics, Financial Economics, Monetary Policy, Banking, and Financial Intermediation.

  • Methods: Empirical methods with micro-data, macro-data, machine learning (neural networks, data visualization, etc), and Computational Economics, specializing in the use of discrete and continuous-time methods.

Committee: Jaroslav Borovička, Simon Gilchrist, Ricardo Lagos

I am on the 2021-2022 job market and available for interviews during the (virtual) 2022 EEA and ASSA meetings.

You can contact me at and my CV is here | LinkedIn

Job Market Paper

"Bank Capitalization Heterogeneity and Monetary Policy " ( 2-Minute JMP Video )

This paper shows that heterogeneity in bank capitalization rates plays a crucial role in the transmission of monetary policy to bank lending. First, I offer new empirical evidence on the dependence of bank lending responses to monetary policy shocks on their capitalization rates. Highly-capitalized banks reduce their lending more after a monetary tightening, even after controlling for bank liquidity, size, and market power in the deposit market. I also document that highly capitalized banks have a riskier portfolio, as measured by loan charge-off rates, and default rates on their loans increase relatively more after a tightening in monetary policy. I then construct a dynamic macroeconomic model that rationalizes the empirical evidence through the interaction of heterogeneous recovery technologies of banks facing a risk-weighted capital constraint. In particular, after an increase in the policy rate, the model predicts that loan rates and default probabilities increase in both sectors. Higher-capitalized banks with a riskier portfolio are more sensitive because the risk-weighted capital constraint affects them more, so they contract lending more. In a counterfactual analysis, I find higher capital requirements amplify the effects of monetary policy.

Other Research Projects

"Financial Frictions, Risk Premia, and Wealth Inequality"

This paper analyzes the relation between risk premia, financial frictions, and wealth inequality in a continuous-time heterogenous agent economy. I study how the spread between the borrowing and lending rates, as well as the return on risky assets, affect wealth inequality. First, I build a model with heterogeneous agents subject to an idiosyncratic shock (labor and investment) where households have access to a risky asset and a safe asset, and I solve the model numerically. I find that an increase in the risk premium generates an increase in the wealth inequality measure (Gini coefficient). Second, I build a model with heterogeneous households subject to an idiosyncratic shock (death probability), who face a bliss point in consumption and have access to a risky asset and a safe asset. This model allows me to obtain a closed-form solution for the policy functions, which I use to find that risky assets’ portfolio share depends on the risk premium and household wealth; and that consumption is a fixed proportion of wealth, but also depends on the risk premium of the risky asset. Third, I build a model with three agents (a representative firm, a representative bank and heterogeneous households) with an aggregate shock to capture general equilibrium effects and make the financial intermediary play a greater role in the financial market, so it can affect the interest rate, the risk premium, wealth accumulation and wealth inequality. I conclude that an increase in risk return generates an increase in the equilibrium interest rate and greater inequality; and an increase in the spread generates a decrease in the equilibrium interest rate and lower inequality.

Useful codes and contributed examples

Toolbox for GDSGE: A Toolbox for Solving DSGE Models with Global Methods

Contributed example for Kiyotaki and Moore (1997): Credit Cycles

Pre-doctoral Publication

“Economic Growth and Wage Stagnation in Peru: 1998-2002” with Carlos Urrutia Review of Development Economics, 19(2): 328-345, 2015.

From 1998 to 2012, the Peruvian economy exhibited rapid growth. Moreover, the composition of the labor force improved in terms of education and experience, two variables that are typically associated to higher human capital. The average worker in 2012 had a higher level of education and was one and a half years older than in 1998, reflecting the impact of the demographic transition. However, the average real wage was roughly constant. We show that a decline in the wage premium for education, and to a minor extent for experience, is responsible for the lack of growth in the average real wage. Had these two premia remained constant throughout the period of analysis, average labor earnings would have increased by about 2.6% per year, of which 0.7 percentage points are accounted for by the changes in the composition of the labor force in terms of age and education. We explore the role of the relative supply of workers with different levels of human capital as an explanation for the decline in the wage premium for education. Finally, we analyze the implications of these findings for some macroeconomic variables, as earnings and wage inequality, the labor share, and total factor productivity.