Hee Su Roh

I am a sixth-year Finance Ph.D. student and job market candidate at the Stanford Graduate School of Business.

Research interest: financial market efficiency, central banking 

Email: heesuroh@stanford.edu

Curriculum Vitae     Department website

Job Market Paper 

The Bond-Lending Channel of Quantitative Easing

With quantitative easing (QE), central banks buy long-term government bonds to lower long-term interest rates. QE removes from the market both the investment risk associated with ownership of the bonds and also the transaction services conveyed by these bonds, which include facilitating the matching of buyers and sellers in the bond market. To the extent that it lends its stock of bonds back to market participants, a central bank replaces these transaction services. In contrast, by not lending its bonds, the central bank further lowers long-term rates by increasing the scarcity of these transaction services. This amplification of the impact of QE on long-term rates through reduced bond lending allows the European Central Bank to achieve its QE rate objective more easily because the alternative of even greater purchases of bonds could be politically contentious. 

Presentation: the 2019 Poster Session of the ECB Forum on Central Banking, the 7th FRBSF-BoC Conference on Advances in Fixed Income Macro-Finance Research, the 34th Australasian Finance and Banking Conference (scheduled)

Working Paper 

Not Equally Special: Collateralised Trading of Nonbanks

Joint with Angela Maddaloni (ECB)

Liquidity in the bond markets is ensured by active markets for borrowing and lending securities. Many important financial markets function well only when bond owners actively lend their bonds. Institutional investors lend their bonds because they can earn fees. Do nonbanks actively lend their bonds and earn fees as much as banks do? In the euro area, although nonbanks hold more bonds than banks, they lend a smaller fraction of their holdings. They also earn smaller fees per unit lending of bonds. Inactive lending of bonds by nonbanks increases the scarcity of these assets and makes it costlier for investors to borrow bonds in the market. 

Presentation: the European Central Bank

Work in Progress  

Front-Running Central Banks

Joint with Angela Maddaloni (ECB)

Central banks have revealed their plans to purchase trillions of dollars of assets from the secondary market as part of their quantitative easing (QE) programs. Can financial institutions front-run the central banks? If so, how does this affect the transmission of QE? We present a theoretical model in which a central bank faces a tradeoff. On the one hand, by inducing investors to front-run the central bank and subsequently sell assets at higher prices to the central bank, the central bank can amplify the stimulus effect of QE. On the other hand, purchasing assets at inflated prices can negatively affect the financial position of the central bank. We show empirical evidence suggesting that hedge funds front-run bond purchases by the European Central Bank.  

Monetary Policy Passthrough Efficiency in the Wholesale Money Market

Joint with Stephan Jank (Deutsche Bundesbank) and Emanuel Monch (Deutsche Bundesbank)