research

2025

1. Firm Performance and (Foreign) Debt Financing Before and During the Global Financial Crisis: Evidence from Firm-Level Data

   Uroš Herman, Andreja Lenarčič, and Mateja Gabrijelčič

   Risk Management, 2025

   Abstract Link PDF

   We examine the impact of financial leverage and foreign financing on firm performance using a large panel of Slovenian firms, before and during the Global Financial Crisis. We find a significant negative effect of leverage on firm performance, even after explicitly controlling for reverse causality, with this effect persisting but weakening during the crisis. Before the crisis, firms that borrowed abroad performed better, although the marginal cost of additional leverage was higher when borrowing abroad. When explicitly controlling for the amount of foreign financing, we find a positive and highly significant effect on firm performance in the pre-crisis period. The positive effect of foreign borrowing is concentrated in privately owned firms (and negative for state-owned firms), and it holds for both domestically and foreign-owned firms. During the crisis, the effect of foreign financing is attenuated and largely insignificant across specifications.

2023

1. Sectoral Exposure to Aggregate Fluctuations, Employment Risk and Monetary Policy

   Uroš Herman

   2023

   Abstract Bib PDF

   This paper studies how differences in employment risk across sectors affect the transmission mechanism of monetary policy. Using micro-level data, I show that households working in sectors more exposed to business cycles—i.e. experiencing higher employment risk—tend to accumulate more precautionary savings than those working in less exposed sectors. I develop a two-sector model with uninsurable, sector-specific employment risk to study how these differences affect the monetary policy transmission in a multi-sector environment. The consumption response is larger and more persistent in the more exposed sector, with a cumulative difference of approximately 30 basis points over four quarters. I identify two channels through which differences in employment risk affect sectoral and aggregate consumption responses and show how the interaction between the two channels amplifies the aggregate consumption response, highlighting the importance of accounting for sector-specific employment risk when analysing the transmission mechanism of monetary policy.

   @techreport{UH_two_sector_22,
     title = {Sectoral Exposure to Aggregate Fluctuations, Employment Risk and Monetary Policy},
     author = {Herman, Uroš},
     journal = {Mimeo},
     year = {2023},
     type = {mimeo}
   }

2. Who Gets Jobs Matters: Monetary Policy and the Labour Market in HANK and SAM

   Uroš Herman, and Matija Lozej

   ECB Working Paper, 2023

   Abstract Link PDF

   This paper first provides empirical evidence that labour market outcomes for the less educated individuals, who also tend to be poorer, are substantially more volatile than those for the well-educated, who tend to be richer. We estimate job finding rates and separation rates by educational attainment for several European countries and find that job finding rates are smaller and separation rates larger at lower educational attainment levels. At cyclical frequencies, fluctuations of the job finding rate explain up to 80% of unemployment fluctuations for the less educated. We then construct a stylised HANK model augmented with search and matching and ex-ante heterogeneity in terms of educational attainment. We show that monetary policy has stronger effects when the job market for the less educated and, hence, poorer workers is more volatile. The reason is that these workers have the most procyclical income coupled with the highest marginal propensity to consume. An expansionary monetary policy shock that increases labour demand disproportionally affects the labour market segment for the less educated, causing a strong increase in consumption. This further amplifies labour demand and increases the labour income of the poor even more, amplifying the initial effect. The same mechanism carries over to forward guidance.

2022

1. Determinants and Effects of Countries’ External Capital Structure: A Firm-Level Analysis (R&R at Review of World Economics)

   Uroš Herman, and Tobias Krahnke

   IMF Working Paper, 2022

   Abstract Link PDF

   This paper examines how a firm’s foreign liability composition affects its resilience during economic turmoil and identifies the key factors shaping foreign capital structures. Using firm-level data, we find that firms with a higher share of foreign equity in their liabilities were significantly less affected by the global financial crisis. This resilience can be attributed mainly to intra-firm trade credit and intra-firm loans, which provided critical financial buffers when external capital markets were distressed and domestic financing was constrained. Furthermore, firms with a positive foreign equity share were less likely to default after the crisis, highlighting the stabilising role of foreign equity financing in improving firm resilience and supporting overall financial stability.

2021

1. Cross-border bank funding and lending in a monetary union: Evidence from Slovenia

   Uroš Herman, and Matija Lozej

   Journal of International Money and Finance, 2021

   Abstract Link PDF

   We propose a novel way, based on the liability composition of banks and firms, to identify a shock to the supply of foreign funds to banks, and investigate its dynamic effects on bank lending to firms, output, and prices. We find that the increase in the supply of foreign funds to banks generates a strong and persistent increase in lending and output, while prices increase with a delay. Shocks to the supply of foreign funds to banks are also an important driver of business cycles, bank lending, and the co-movement between bank loans and output. When we distinguish between the behaviour of domestic and foreign-owned banks, we find that foreign-owned banks are slower in passing the increase in foreign funding to firms.