Lennart Niermann

Job Market Paper

Decomposing the Investment Channel of Monetary Policy (with M. Momm) [PDF]

European Central Bank's Young Economist Prize 2026

Cambridge Finance Best Student Paper Award 2026

Abstract. Monetary policy surprises conflate interest rate changes with belief revisions about future economic fundamentals, biasing conventional estimates of how corporate investment responds to interest rates. This paper recovers the causal effect of interest rates on corporate investment by exploiting quasi-experimental variation from the ECB's 2016 Corporate Sector Purchase Programme (CSPP), which created persistent cross-sectional differences in firms' borrowing costs through bond market segmentation. We find that a one-percentage-point decline in firms’ borrowing costs increases investment by 19 percent over four quarters. Belief revisions around monetary policy surprises offset this response by at least 34 percent on average. The gap reflects a sizable firm-level information effect. Our findings have direct implications for the calibration of quantitative macroeconomic models. Not correcting for the information effect, the role of capital adjustment costs is larger than existing estimates imply, and under a New Keynesian model monetary policy's aggregate effect on output is 21 percent smaller. More broadly, our findings highlight the first-order role of heterogeneous belief revisions in monetary policy transmission.

Presentations: ECB (Seminar), Chicago FED (Seminar), ASSA 2027* (Washington DC), ECB Forum on Central Banking 2026 (Sintra), EEA 2026 (Dublin), PSE-CEPR Policy Forum 2026, RAPS/RCFS Europe Conference 2026 (Cambridge), Theories and Methods in Macro 2026 (Montreal), Midwest Macro Spring 2026 (Milwaukee), EDGE Conference 2025 (Cambridge).

Working Papers

The Role of Penalties for Sovereign Default Expectations: Evidence from the Courts [PDF]

Runner-up of the Cambridge Finance Best Student Paper award 2024

Abstract. Why do sovereigns repay foreign creditors when external enforcement is weak? This paper shows that direct economic default penalties - not just exclusion from financial markets - are a key determinant of repayment incentives. I exploit quasi-exogenous variation in the cost of default generated by US court rulings in sovereign default litigation. Identification comes from high-frequency responses in third-country sovereign bonds governed by US law whose issuers are not parties to the litigation. I find that a one percentage point increase in the recovery rate lowers the default probability by 19 basis points. I interpret these results in a dynamic model of international borrowing with endogenous default and endogenous debt recovery rates. Calibrated to match the empirical relationship between recovery and default, the model implies that a one percentage point increase in the cost of default lowers the default probability by 7.9 basis points. I find that higher default penalties can be welfare improving. This offers an explanation for why many emerging markets have been pursuing high-debt-high-default-cost regimes, heightening financial instability under probabilistic tail events.

Presentations: EEA-ESEM 2026 (Dublin), Midwest Macro Spring 2026 Conference (Milwaukee), RIEF Meeting 2026 (Paris), ASSA 2027 (poster; Washington DC), CEPR Paris Symposium 2024 (poster), 96th IAEC (Philadelphia), EUI (seminar).

The Network Origins of Financial Cycles (with G. Carboni) [PDF]

Abstract. We use proprietary European holdings data to show that common ownership is informative for how shocks transmit between securities. Holder-base overlap predicts cross-sectional variation in abnormal excess yield changes, conditional on a rich set of bond- and bond-pair characteristics. We provide evidence consistent with a causal interpretation by exploiting a major fiscal surprise from Germany in 2025. We show that non-German sovereign bonds with greater pre-existing holder-base overlap with German Bunds experience larger abnormal excess-yield spillovers over a tight event window. Motivated by this, we construct pairwise measures of holder-base overlap and characterize the resulting network of the European sovereign bond market. We then calibrate a common-ownership network to the German event study and find that security-interconnectedness amplifies aggregate volatility from security-specific shocks by roughly 2.5 to 4 times relative to a disconnected market.

Work in Progress

Call Me Maybe: Debt Management with Callable Perpetuities (with M. Ellison, E. Faraglia and F. Velde) [Draft Coming Soon]

Pushing on a String: The Role of the Information Effect

Policy Publications

Benchmarking Dynamically Stable Public Debt Trajectories for Low-Income Countries (with P. K. Iossifov and A. Abbas), IMF Working Paper Series (2026) [PDF]

Abstract. In this paper, we develop two complementary approaches for benchmarking the public debt trajectories of Low-Income Countries (LICs) to assess their dynamic stability. We compare the evolution of the overall public debt-to-GDP ratios of reference LICs with the historical experiences of other countries with similar characteristics, which are now further down the path of economic development and have not experienced public debt stress events. We rely on both direct comparison and a novel application of the synthetic control method (SCM). These public debt trajectories that are dynamically stable from a historical perspective can provide insights into debt sustainability analyses for LICs.

Presentations: IMF Seminar (2024, 2026). Worldbank Seminar

The COVID-19 crisis: what explains cross-country differences in the pandemic’s short-term economic impact (with I. Pitterle), UN Working Paper Series (2021) [PDF]

Abstract. The COVID-19 pandemic has caused the most universal health and socio-economic crisis in recent history. However, the magnitude of the economic damage has differed widely; some countries were hit particularly hard, while others have managed to weather the storm much better. In this paper, we use cross-country regression analysis to identify factors that help explain the differences in the growth impact of the COVID-19 shock. Our findings underscore the critical role of balancing health and economic concerns in managing the pandemic as both a country’s exposure to the coronavirus and the stringency of containment measures are strongly correlated with its growth performance. In addition, our results shed light on several aspects of economic resilience. Good governance, provision of fiscal support and strong macroeconomic fundamentals all helped cushion the economic impact. By contrast, a lack of economic diversification – reflected in overreliance on the tourism sector or oil production – has significantly amplified the shock.

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