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Katie Jones

Latest publications

Duncan, Alfred & Nolan, Charles, 2019. "Disputes, debt and equity," Theoretical Economics, Econometric Society, vol. 14(3), September.

We show how the prospect of disputes over firms’ revenue reports promotes debt financing over equity. This is demonstrated in a costly state verification model with a risk-averse entrepreneur. The prospect of disputes encourages incentive contracts that limit penalties and avoid stochastic monitoring, even when the lender can commit to stochastic monitoring. Consequently, optimal contracts shift from equity toward standard debt. In short, when audit signals are weakly correlated with true incomes, standard debt contracts emerge as optimal; if audit signals are highly correlated with true incomes, optimal contracts resemble equity. When audit costs are sufficiently high, stochastic monitoring may be optimal. Optimal standard debt contracts under imperfect audits are shown to reproduce key empirical facts of U.S. firm borrowing.

Duncan, Alfred & Nolan, Charles, 2019. "Reform of the UK Financial Policy Committee", Scottish Journal of Political Economy, DOI:10.1111/sjpe.12228

Duncan, Alfred & Nolan, Charles, 2018. "Financial Frictions in Macroeconomic Models". Oxford Research Encyclopedia of Economics and Finance. Oxford Research Encyclopedias . Oxford University Press.

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Research

 
Disputes, debt and equity

Co-authored with Charles Nolan

Theoretical Economics (2019)

Model ingredients

  • Costly state verification, risk averse entrepreneurs, imperfect audits, full commitment audit strategies.

Main result

  • Low quality audits encourage debt financing over equity.

Financial frictions in macroeconomic models

Co-authored with Charles Nolan

Oxford research encyclopedia of economics and finance (2018)

​Abstract

In recent decades, macroeconomic researchers have looked to incorporate financial intermediaries explicitly into business-cycle models. These modeling developments have helped us to understand the role of the financial sector in the transmission of policy and external shocks into macroeconomic dynamics. They also have helped us to understand better the consequences of financial instability for the macroeconomy. Large gaps remain in our knowledge of the interactions between the financial sector and macroeconomic outcomes. Specifically, the effects of financial stability and macroprudential policies are not well understood.

Reports, blogs and press

 
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Report: Missing firm creation in the UK during the Covid-19 lockdown (June 2020 update)

Co-authored with Anthony Savagar and Miguel Leon-Ledesma

Relative to the same period last year and up until 31 May,

  • business creation decreased 25% since the lockdown.

  • This amounts to over 38,000 fewer businesses than if the 2019 trend had continued.

  • Regionally, Wales, Scotland, and Northern Ireland suffer the largest contraction and Greater London the smallest.

Report: Missing firm creation in the UK during the Covid-19 lockdown (May 2020)

Co-authored with Anthony Savagar and Miguel Leon-Ledesma

Relative to the same period last year and up until 30 April,

  • business creation decreased 32% since the lockdown.

  • This amounts to over 27,000 fewer businesses than if the 2019 trend had continued.

  • The construction and retail trade sectors suffer the largest declines in business creation.

Teaching

 
EC3003 Principles of macroeconomics

  • Data driven module with a focus on UK business cycles.

  • The module is taught mostly by distance.

  • In-person lessons focus on data analysis and policy development exercises.

  • Example plot taken from teaching materials.

EC562 Financial economics

  • An advanced undergraduate introduction to financial economics.

  • Includes an introduction to the Julia programming language for applications in finance.

EC881 Advanced macroeconomics

  • Core PhD macroeconomics module.

  • Focuses on

    • dynamic programming,

    • solution methods, and

    • estimation methods.