About I am a Senior Economist at the Federal Reserve Bank of Boston, a visiting scholar at the MIT Golub Center for Finance and Policy, and a visiting faculty at Harvard University. My research focuses on international finance, banking, and macroeconomics, covering topics including financial & banking globalization, capital flows, geoeconomics, US-China economic linkages, financial networks, and household finance. I received my Ph.D. in Economics from the University of California, Berkeley.

View my curriculum vitae here.

Contact Information
Email:
lshengshen@gmail.com
lesliesheng.shen@bos.frb.org
lsshen1@mit.edu Phone: +1-216-577-8309

Research

Scarred Consumption
with Ulrike Malmendier
Forthcoming in AEJ: Macroeconomics

We show that economic downturns can “scar” consumers in the long-run. Consumers who have personally experienced unemployment spells or have lived through times of high unemployment remain pessimistic about their future financial situation and spend significantly less for years to come, controlling for income, wealth, and employment. Their actual future income is uncorrelated with past lifetime experiences after controls. Due to their experience-induced frugality, scarred consumers accumulate more wealth. We use a stochastic life-cycle model to show that the estimated negative relationship between past downturns and consumption cannot reflect financial constraints, income scarring, or other notions of unemployment scarring, but is predicted by our model of consumption scarring. As also predicted by the model, the estimated effects of unemployment shocks are stronger for younger cohorts. Our results provide a novel micro-foundation for fluctuations in aggregate demand and imply long-run effects of macroeconomic shocks.

Local Effects of Global Capital Flows: A China Shock in the U.S. Housing Market
with Zhimin Li and Calvin Zhang
Forthcoming in Review of Financial Studies

This paper studies the real effects of foreign real estate capital inflows. Using transaction-level data, we document (i) a “China shock” in the U.S. housing market characterized by surging foreign Chinese housing purchases after 2008; and (ii) “home bias” in these purchases, as they concentrate in neighborhoods historically populated by ethnic Chinese. Exploiting their temporal and spatial variation, we find that these capital inflows raise local employment, with the effect transmitted through a housing net worth channel. However, they displace local lower-income residents. Our results show that real estate capital inflows can both stimulate the real economy and induce gentrification.

Global Banking and Firm Financing: A Double Adverse Selection Problem

This paper shows, theoretically and empirically, that financial systems with both global and local banks exhibit “double adverse selection” in credit allocation across firms, which gives rise to a double adverse selection channel of international transmission. Global (local) banks have a comparative advantage in extracting information on global (local) risk, and this double information asymmetry creates a segmented credit market where each bank lends to the worst firms in terms of the unobserved risk factor. Given a bank funding (e.g., monetary policy) shock, double adverse selection affects firm financing at the extensive and price margins, generating spillover and amplification effects across countries.

Risk Sharing and Amplification in the Global Financial Network
with Tony Zhang

We develop a structural model of the global financial network and analyze its evolving role in facilitating risk sharing and propagating shocks across countries and sectors. The model introduces a two-layer network structure, incorporating both the global interbank and bank-firm credit networks, and jointly accounts for bank capital flows and lending prices. Using balance sheet data from 19 countries, we estimate the price elasticities of cross-border loan supply and demand, which reveal significant heterogeneity in the willingness and capacity of global banks to provide intermediary services. We show that this heterogeneity is key to explaining the variation in risk sharing and shock propagation both across countries and over time. In particular, cross-border lending supply has become less elastic since the global financial crisis, resulting in a weakening of international risk sharing. We provide suggestive evidence that the tightening of macroprudential policy has contributed to the decline in risk sharing.

The Intangible Gender Gap: An Asset Channel of Inequality
with Carlos Avenancio-Leon

We propose an “asset channel of inequality” that contributes to gender inequities. We establish that industries with low (high) gender pay gaps have high (low) shares of tangible assets. Because asset tangibility determines firms’ ability to collateralize assets and borrow, credit conditions affect industries differently. We show that credit expansions further reduce the pay gap in low- pay-gap industries while leaving it unaffected in high-pay-gap industries, making low-pay-gap industries more appealing for women. Consequently, gender sorting across industries increases, which then cements gender roles and accentuates workplace gender bias. Ultimately, credit expansions help women “swim upstream” but also reinforce glass ceilings.

Consumption Quality and the Welfare Implications of Business Cycle Fluctuations
with Casper Nordal Jørgensen

This paper introduces a new approach for estimating the welfare costs of business cycle fluctuations. We quantify and evaluate a new channel that consumers use to smooth macroeconomic shocks—the quality channel of consumption reallocation. Using detailed micro-level panel data on household expenditures, we show that there exists significant heterogeneity in the degree of reallocation across the quality vs. quantity margins of consumption reallocation across income groups: high-income households tend to adjust their consumption at the quality channel when facing negative shocks, while the low-income households are more likely to adjust at the quantity margin. Our results suggest the poor is rationed in their margins of consumption reallocations when hit by a negative shock and thereby bear a disproportionately greater share of the cost of business cycle fluctuations. We develop a model in which households have non-homothetic preferences and value both the quality and quantity of purchased products. Using the model, we estimate structural parameters that are consistent with the patterns of consumption behavior observed in the data and analyze the welfare implications of business cycles fluctuations.

Policy

Dollar Funding Stresses in China
with Laura Kodres and Darrell Duffie