I am an Assistant Professor of Finance at NYU Stern and an academic consultant for the National Bank of Belgium.
I received my PhD in Economics from the University of Chicago and MSc from Bocconi University.
I do research in the areas of Financial Intermediation, Applied Macro, Productivity, and Spatial Economics. My focus is on understanding the effects of market frictions—both financial and real—on firms' decisions and how these distortions impact aggregate outcomes, the spatial distribution of economic activity, and ultimately economic growth.
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My research
My research contributes to three interrelated areas of the literature in finance and economics, placing firms and their decision-making at the forefront. First, my work connects to the literature investigating the drivers of firm-level and aggregate productivity growth. Second, it contributes to the corporate finance and financial intermediation literature studying the real effects of financial market frictions at the micro and macro levels. Finally, my research bridges the industrial organization literature focusing on firm dynamics with the literature in macro and monetary economics studying the contribution of real and nominal rigidities on business cycle fluctuations.
To study these questions, I favor a micro-to-macro approach that combines rich micro data, reduced-form and structural techniques, and quantitative models. The blend of empirical and quantitative analysis helps me establish causal relationships and estimate relevant structural parameters, and then quantify aggregate implications and evaluate policy-relevant counterfactuals.
Publications [Top]
1. Anatomy of the Phillips Curve: Micro evidence and macro implications (with L. Gagliardone, M. Gertler, & J. Tielens)
American Economic Review (Accepted)
[Abstract] [New York Times Article]
Cite
We use a unique high-frequency micro-dataset to estimate the slope of the primitive form of the New Keynesian Phillips curve, which features marginal cost as the relevant real activity variable. Our dataset encompasses product-level prices, costs, and output within the Belgian manufacturing sector over twenty years, recorded at a quarterly frequency. Leveraging the richness of the data, we adopt a bottom-up approach that identifies the Phillips curve's slope by estimating the primitive parameters that govern firms' pricing behavior, including the degrees of price rigidity and strategic complementarities in price setting. Our estimates indicate a high slope for the marginal cost-based Phillips curve, which contrasts with the low estimates of the conventional unemployment or output gap-based formulations in the literature. We reconcile the difference by showing that, although the pass-through of marginal cost into inflation is substantial, the elasticity of marginal cost in relation to the output gap is low. Furthermore, through an examination of the transmission of oil shocks, we illustrate how the marginal cost-based Phillips curve offers a transparent means of capturing the impact of supply shocks on inflation.
Gagliardone Luca, Mark Gertler, Simone Lenzu, and Joris Tielens. "Anatomy of the Phillips Curve: Micro Evidence and Macro Implications." (2023)
@article{GGLM_PC2024,
title={Anatomy of the Phillips Curve: Micro evidence and macro implications},
author={Gagliardone, Luca, ang Gertler, Mark, and Lenzu, Simone, and Tielens, Joris},
journal={},
year={2024}
}
2. Propagation and amplification of local productivity spillovers (with X. Giroud, Q. Maingi, & H. Mueller)
Econometrica, Volume 92 (No. 5), September 2024, Pages 1589-1619
[Abstract]
[Online appendix]
[Voxeu Article]
Cite
The gains from agglomeration economies are believed to be highly localized. Using confidential Census plant-level data, we show that large industrial plant openings raise the productivity not only of local plants but also of distant plants hundreds of miles away, which belong to large multi-plant, multi-region firms that are exposed to the local productivity spillover through one of their plants. This "global" productivity spillover does not decay with distance and is stronger if plants are in industries that share knowledge with each other. To quantify the signifcance of frms' plant-level networks for the propagation and amplification of local productivity shocks, we estimate a quantitative spatial model in which plants of multi-region firms are linked through shared knowledge. Counterfactual exercises show that while large industrial plant openings have a greater local impact in less developed regions, the aggregate gains are greatest when the plants locate in well-developed regions, which are connected to other regions through firms' plant-level (knowledge-sharing) networks.
Xavier, Giroud, Simone Lenzu, Quinn Maingi, and Holger Mueller (2024): "Propagation and amplification of local productivity spillovers," Econmetrica, 92, 1589–-1619.
@article{Giroud_etal2021,
title={Propagation and Amplification of Local Productivity Spillovers},
author={Giroud, Xavier and Lenzu, Simone and Maingi, Quinn and Mueller, Holger},
journal={Econometrica},
volume={92},
number={5},
pages={1589–-1619},
year={2024}
}
3. Comment on "Trade and diffusion of embodied technology: An empirical analysis"
Journal of Monetary Economics, Volume 137, July 2023, Pages 146-149.
[Abstract]
Cite
4. Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy (with F. Mezzanotti & M. Bottero)
Journal of International Economics, Volume 126, September 2020: 103328.
[Abstract]
[Ungated Version]
[Online appendix]
[Data and Code]
Cite
In the context of the European crisis, we examine the transmission of a balance sheet shock to the real economy. Using Italian loan-level data, we show that the shock to the banks' sovereign portfolio caused by the 2010 Greek bailout was passed on to firms through a credit contraction. This was particularly the case for banks with weaker balance sheet. The contraction in credit was similar for both large and small firms, but it only negatively affected the investment and employment decisions of smaller firms. These results confirm that banks' security portfolios can be a source of economic fragility.
Bottero, Margherita, Simone Lenzu, and Filippo Mezzanotti. "Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy." Journal of International Economics 126 (2020): 103328.
@article{bottero2020sovereign,
title={Sovereign debt exposure and the bank lending channel: Impact on credit supply and the real economy},
author={Bottero, Margherita and Lenzu, Simone and Mezzanotti, Filippo},
journal={Journal of International Economics},
volume={126},
pages={103328},
year={2020},
publisher={Elsevier}
}
5. Systemic risk on different interbank network topologies (with G. Tedeschi)
Physica A, Volume 391, Issue 18, 15 September 2012, Pages 4331-4341.
[Abstract] Cite
In this paper we develop an interbank market with heterogeneous financial institutions that enter into lending agreements on different network structures. Credit relationships (links) evolve endogenously via a fitness mechanism based on agents' performance. By changing the agent's trust on its neighbor's performance, interbank linkages self-organize themselves into very different network architectures, ranging from random to scale-free topologies. We study which network architecture can make the financial system more resilient to random attacks and how systemic risk spreads over the network. To perturb the system, we generate a random attack via a liquidity shock. The hit bank is not automatically eliminated, but its failure is endogenously driven by its incapacity to raise liquidity in the interbank network. Our analysis shows that a random financial network can be more resilient than a scale free one in case of agents' heterogeneity.
Lenzu, Simone, and Gabriele Tedeschi. "Systemic risk on different interbank network topologies." Physica A: Statistical Mechanics and its Applications 391, no. 18 (2012): 4331-4341.
@article{lenzu_tedeschi2012,
title={Systemic risk on different interbank network topologies},
author={Lenzu, Simone and Tedeschi, Gabriele},
journal={Physica A: Statistical Mechanics and its Applications},
volume={391},
number={18},
pages={4331--4341},
year={2012},
publisher={Elsevier}
}
Working papers [Top]
1. Financial shocks, productivity, and prices (with D. Rivers & J. Tielens)
Review of Economic Studies (Revise and Resubmit; resubmitted)
[
Abstract]
Cite
Combining administrative records on firm-level output prices and quantities with quasi-experimental variation in credit supply, we explore the interconnection between the productivity and pricing effects of financial shocks. We show that a tightening of credit conditions affects firms' technical productivity growth (TFPQ) in the long-run and but also induces firms to change their pricing policies. As a result, commonly adopted estimates that rely on revenue-based productivity measures (TFPR), which conflate the pricing and productivity effects, offer biased predictions regarding the effects of financial shocks on firms' real productivity growth. Moreover, we document that the nominal adjustments triggered by these shocks have real implications. By adjusting prices, firms can leverage the product market to relieve pressure to cut expenditures on productivity-enhancing activities, thereby mitigating the contraction in future productivity growth.
Lenzu, Simone, David Rivers, and Joris Tielens. "Financial shocks, productivity, and prices" (2024).
@article{lenzu_etal2021,
title={Financial Shocks, Productivity, and Prices},
author={Lenzu, Simone and Rivers, David and Tielens, Joris},
year={2024}
}
2. Zombie lending and policy traps (with V. Acharya & O. Wang)
Review of Economic Studies (Revise and Resubmit; 2nd round)
[
Abstract] [
Voxeu Article]
Cite
We build a model with heterogeneous firms and banks to analyze how policy can affect the efficiency of credit allocation and long-term economic outcomes. When transitory demand or productivity shocks are small, conventional monetary policy can restore efficient bank lending and production by lowering interest rates. For moderately large shocks, however, conventional policy may hit the effective lower bound, necessitating unconventional policy such as regulatory forbearance towards banks to stabilize the economy. Aggressive unconventional policy runs the risk of introducing zombie lending and a "diabolical sorting", whereby low-capitalization banks extend new credit or evergreen existing loans to low-productivity firms. In a dynamic setting, policy aimed at avoiding short-term recessions can be trapped into protracted excessive forbearance due to congestion externalities imposed by zombie lending on healthier firms. The resulting economic sclerosis transforms transitory shocks into phases of delayed recovery and potentially permanent output losses. Our model highlights the importance of maintaining a well-capitalized banking system to avoid such policy traps as not raising capital requirements upfront but raising them signi?cantly upon the arrival of shocks can also back?re by encouraging zombie lending.
Viral V. Acharya, Simone Lenzu, and Olivier Wang. "Zombie lending and policy traps" (2021).
@article{Acharya_etal2021,
title={Zombie lending and policy traps},
author={Acharya, Viral V, and Lenzu, Simone and Wang, Olivier},
journal={},
year={2021}
}
3. The cost and shadow cost of credit (with F. Manaresi)
Journal of Financial Economics (Reject and Resubmit)
[
Abstract]
Cite
Using a novel micro-level dataset on firms' production and financing decisions, we estimate the distribution of firm-specific financial wedges in capital accumulation due to binding borrowing constraints-the shadow cost of credit-and compare these to observed market price of credit-the borrowing rate. We find that shadow costs are significantly higher, more dispersed, and more sensitive to variations in credit risk factors than borrowing rates. Our analysis also reveals a high sensitivity of firms' investment to shadow costs, indicating that credit rationing, rather than elevated borrowing costs, is the primary channel through which credit market frictions distort investment policies and capital allocation, particularly for small and medium enterprises.
Lenzu Simone, and Francesco Manaresi. "The cost of shadow cost of credit" (2024).
@article{Lenzu_Manaresi2024,
title={The Cost of Shadow Cost of Debt},
author={Lenzu, Simone, and Manaresi, Francesco},
journal={},
year={2022}
}
4. Micro and macro cost-price dynamics in normal times and during inflation surges (with L. Gagliardone, M. Gertler, & J. Tielens)
[
Abstract]
Cite
5. Sources and implications of resource misallocation: New evidence from firm-Level marginal products and user costs (with F. Manaresi)
[
Abstract] [
Appendix]
Cite
Using micro-data on firm-specific borrowing costs and wages, we demonstrate that distortions in firms'? employment and investment policies can be empirically measured using firm-level gaps between marginal revenue products and user costs (MRP-cost gaps). We estimate MRP-cost gaps for 4.7 million firm-year observations in Italy between 1997 and 2013, showing the variation in these measures is closely related to the extent of credit market frictions and to regulations that impose implicit costs of labor that vary as a function of firm size. Using the estimated MRP-cost gaps, we assess the scope of capital and labor misallocation in Italy, and its impact on aggregate output and total factor productivity (TFP). We calculate that, holding constant the aggregate capital and labor endowments in the economy, the Italian corporate sector could produce 6% to 8% more output by reallocating resources toward higher-value users. The output losses from misallocation are larger (i) during episodes of macro-financial instability, (ii) in non-manufacturing industries, (iii) in geographical regions with less developed socioeconomic institutions and (iv) among high-risk firms. We highlight an important gain/risk tradeoff: Output/TFP gains from reallocation might come at the expense of increasing the volatility of the economy and the fragility of the credit system because maximizing reallocation gains requires a transfer of resource from large, old, and low-risk firms toward small, young, and high-risk firms.
Lenzu, Simone, and Francesco Manaresi. "Sources and implications of resource misallocation: New evidence from firm-Level marginal products and user costs." Available at SSRN 3068160 (2019).
@article{lenzu2019sources,
title={Sources and implications of resource misallocation: New evidence from firm-Level marginal products and user costs},
author={Lenzu, Simone and Manaresi, Francesco},
year={2019}
}
6. Bankruptcy in equilibrium with ex-ante effects (with J. Martinez-Correa & A. Taburet)
(Draft coming soon)
[
Abstract]
Most of the existing empirical studies analyzing the real effects of bankruptcy reforms focus on firms already in a default state or undergoing liquidation. Using detailed microdata from Denmark and quasi-experimental variation from a major bankruptcy reform, we estimate the causal effects of increased creditor empowerment on the (anticipatory) behavior of firms far from financial distress. By integrating these estimates into a structural model, we quantify the welfare costs of moral hazard in lending markets (effort provision and risk shifting) and explore the general equilibrium impacts of various bankruptcy reforms, offering new insights into their broader economic implications.
Other peer-reviewed publications [Top]
1. Two old masters and a young genius: The creativity of Francis Bacon, Lucian Freud, and Jean-Michel Basquiat (with D. Galenson)
Journal of Cultural Economics, 47, 489-511 (2023).
[
Abstract]
Cite
Francis Bacon, Lucian Freud, and Jean-Michel Basquiat were key figures in the resurgence of expressive figurative painting in the late twentieth century. All three made personal visual art, drawing their subjects from among the people and things they cared most about. Yet they worked in very different ways, toward very different goals. This paper considers how their differing motivations and methods resulted in radically differing life cycles of creativity, measured both by auction market outcomes and by the judgments of art scholars. The experimental art of Bacon and Freud developed gradually and produced masterpieces late in their long lives, whereas the conceptual Basquiat made his most innovative art well before his premature death.
David Galenson and Simone Lenzu. "Two old masters and a young genius: The creativity of Francis Bacon, Lucian Freud, and Jean-Michel Basquiat." (2023)
@article{Galenson_Lenzu2023,
title={Two old masters and a young genius: The creativity of Francis Bacon, Lucian Freud, and Jean-Michel Basquiat},
author={Galenson, David, and Lenzu, Simone},
journal={Journal of Cultural Economics},
year={2023}
}
2. Pricing genius: The market evaluation of innovation (with D. Galenson)
Journal of Applied Economics, Volume 19, Issue 2, November 2016, Pages 219-248.
[
Huffington Post Article] [
Voxeu Article] [
Business Insider Article]
[
Abstract]
Cite
Economists have neglected a key issue for understanding and increasing technological change, in failing to study how talented individuals produce innovations. This paper takes a quantitative approach to this problem. Regression analysis of auction data from 1965-2015 reveals that the age-price profiles of Jackson Pollock and Andy Warhol - the two greatest painters born in the 20th century - closely resemble the age profiles of the two artists derived both from textbooks of art history and from retrospective exhibitions. The agreement of these sources confirms that the auction market assigns the highest prices to the most important art, and examination of the artists' careers reveals that this art is the most important because it is the most innovative. These results lend strong support to our understanding of creativity at the individual level, with a sharp contrast between the extended experimental innovation of Pollock and the sudden conceptual innovation of Warhol.
Galenson, David W., and Simone Lenzu. "Pricing genius: The market evaluation of innovation." Journal of Applied Economics 19, no. 2 (2016).
@article{galenson_lenzu2016,
title={Pricing genius: The market evaluation of innovation},
author={Galenson, David W and Lenzu, Simone and others},
journal={Journal of Applied Economics},
volume={19},
number={2},
year={2016},
publisher={Universidad del CEMA}
}
Work in progress [Top]
1. Additive firm's dynamics
(with T. Philippon)
2. Selling bad loans
(with M. Bottero, F. Mezzanotti, & GP. Parise)
3. Credit and conflict in Nigeria
(with O. Bello, T. Oki, & A. Ndiaye)
4. An analytical solution of Menu Cost pricing models for monetary policy analysis
(with A. Ebsim, L. Gagliardone, M. Gertler, & J. Tielens)
Teaching [Top]
Foundations of finance
Lectures on structural methods for economics and finance
Current and former students [Top]
Pietro Reggiani (2022, Cornerstone Research)
Quinn Maingi (2023, USC Marshall)
Luca Gagliardone (2024, on the market)
Yannis Cabossioras (2024, on the market)
