Sherry Lauren Forbes Department of Economics The University of Virginia P.O. Box 400182 Charlottesville, VA 22904 (434) 381-6177 (O¢ ce) (312) 560-3828 (Mobile) [email protected] people.virginia.edu/ slf9s Education Ph.D. in Economics, The University of Virginia, Expected: May 2015 M.A. in Political Science, The University of Chicago, 2006 M.Phil. in Economics, The University of Oxford, 2004 B.A. in Economics and International Relations, Sweet Briar College, 2002 (summa cum laude, PBK) Fields Primary: Macroeconomics Secondary: Empirical Finance, International Political Economy and Trade, Computational Economics References Prof. Eric Young Economics Department, University of Virginia (434) 924-3811, [email protected] Prof. Toshihiko Mukoyama Economics Department, University of Virginia (434) 924-6751, [email protected] Prof. John McLaren Economics Department, University of Virginia (434) 924-3994, [email protected] Prof. Charles Holt Economics Department, University of Virginia (434) 924-7894, [email protected] Relevant Experience Instructor, The University of Virginia, 2011-2014 – ECON 4360: Empirical Finance. (Capstone course for the Finance Concentration) AEA CSWEP Summer Economics Fellow, Center for Economics Studies, U.S. Census Bureau, 2012 Instructor, Sweet Briar College, 2010-2014 – ECON 452: Senior Seminar, ECON 332: Econometrics, ECON 313: International Macroeconomics and Finance, ECON 316: Industrial Organization, ECON 221: Theory of Financial Markets, ECON 219: Money and Banking, ECON 202: Intermediate Macroeconomics, ECON 102: Principles of Macroeconomics, ECON 101: Principles of Microeconomics, HNRS 470: Advanced Honors Research, HNRS 399: Summer Honors Research Instructor, The University of Chicago, 2008 – INST 29205: Contemporary Topics in Post-Soviet Political Economy Translator / Editor, Expert Analytical Centre, Expert Group (Russia), 2004-2005 Operations Research Summer Intern, OSD/PA&E/RAM-D (now OSD/CAPE/IRW), 2003-2004 1 Presentations and Workshops Firm Dynamics over the Business Cycle. Macro Workshop, University of Virginia, 2014 Endogenous Formation of Dark Networks. International Studies Association Conference, 2013, Sweet Briar College, 2013, Experimental Reading Group, University of Virginia, 2013, Economic Sciences Association Conference, 2012 Stackelberg Security Games with Uncertainty: Motivations from the Piracy Problem. Economic Sciences Association Conference, 2011 Barcelona LeeX Experimental Economics Summer School in Macroeconomics, Universitat Pompeau Fabra, Barcelona, Spain, 2014 High Performance Computing Bootcamp, University of Virginia Alliance for Computational Science and Engineering, 2013 Duke Summer Institute, The Emergence of Modern Economics, The Center for the History of Political Economy, Duke University, NC, 2012 Bridging Areas of Expertise: Funding Research on Terrorism, University of Texas at Dallas, 2010 Awards Dissertation Fellowship, Bankard Fund for Political Economy, 2013 Quantitative Collaborative Fellowship, The University of Virginia, 2010-2012 Snavely Prize for Outstanding Dissertation Proposal, The University of Virginia, 2011 Graduate Teaching Assistant Award, The University of Virginia, 2011 Prize Lectureship in the International Studies Program, The University of Chicago, 2008 Jack Kent Cooke Foundation Graduate Fellowship, 2002-2008 Research Fellowship, University of Chicago and the Mellon Foundation, 2006 Grants Steer Family Endowed Fund Travel Grant (Barcelona), The University of Virginia, 2014 Faculty Research Grant, “Experiments in Asset Pricing”, Sweet Briar College, 2013 Jessie Ball DuPont Faculty Development Grants, Sweet Briar College, 2013-2014 Robert J. Huskey Travel Grant (Geneva), The University of Virginia, 2011 National Science Foundation Grant, “Endogenous Formation of Dark Networks”, 2010-2011 Professional Service Executive Director, OXONIA, The Oxford Institute for Economic Policy, 2002-Present Member, The International Institute for Strategic Studies (IISS), London UK, 2003-Present Member, American Economic Association (AEA), 2014-Present Referee for Journal of Economic Dynamics and Control, Theory and Decision 2 Job Market Paper Firm Dynamics over the Business Cycle – Can a real business cycle model match the empirical patterns of selection in entry, exit, and employment dynamics over the cycle as well as the RBC stylized facts for key macroeconomic aggregates? The answer found in this paper is yes. Importantly, getting the facts right for key macro aggregates helps replicate the selection e¤ ects at the …rm level, and getting the facts right for …rm entry and exit improves several of the macro properties of the model. To show this, this paper builds a DSGE model with heterogeneous …rms that endogenizes entry and exit decisions and features investment possibilities at both the intensive (through capital accumulation) and extensive (through the creation of new and heterogeneous …rms) margins. Sunk costs required for entry and …xed costs required in production mean that not only does the number of …rms ‡uctuate over the cycle, but so too does the character of their productivity distribution. The model replicates, both qualitatively and quantitatively, key features of entry and exit in the data: entry is procyclical, but exit is roughly ‡at over the cycle; and plants that enter during recessions are, on average, more productive and larger (in terms of employment) than plants entering during booms. Further, as a business cycle model, it retains the successes of standard RBC models and improves on several of its properties: in this model, the volatility of consumption relative to output is much closer to the data, output displays persistence in line with the data and features a "hump-shaped" response to a transitory shock, and the cross-correlations of output, net entry, and pro…ts are all very close to those found in the data. Finally, to incorporate the rich dynamics for …rm heterogeneity and changes in the productivity distribution over the cycle, this paper develops an algorithm to incorporate and track – exactly, and with a …nite-dimensional object – a potentially in…nite-dimensional distribution of …rms and …rm productivities. Working Papers Endogenous Formation of Dark Networks, with N. Candelo, S. Martin, M. McBride, and B. Allison. Submitted. – We study a dark network whose members face two di¤ erent threats to their survival: …rst, a chance of being directly detected and arrested by the authorities; and second, a possibility of being "arrested by association" if another member of their network is arrested. Our game-theoretic model predicts that the number of members in equilibrium network structures should vary with changes in the former, but not with changes in the latter. We test these predictions in a laboratory experiment and …nd evidence in favor of our …rst prediction: increasing the probability of detection reduces network size. However, contrary to our predictions, we also …nd that increasing the impact that any one arrest has for the indirect detection of other members also reduces network size. Further study of these behavioral anomalies has the potential to enrich the design and implementation of policies intended to disrupt the formation of dark networks. Experiments in Asset Pricing. Work in Progress. – This paper compares the aggregate pricing implications from a traditional consumption-based asset pricing model with those that develop during laboratory experiments with heterogeneous investors. While Lucas-type asset pricing models have served as a backbone for research in asset pricing and dynamic macro models for several decades now, they have been heavily criticized for their wellknown and consistent empirical failures – particularly by researchers in behavioral …nance. But might many of the anomalies found in the behavioral …nance literature be overstated and instead result from experiments that are devoid of context? E.g., if the only task subjects have is to trade a single asset, it is really not that surprising to see bubbles (out of boredom). In the experiments carried out for this paper, I place subjects in an experimental environment more representative of the environment in which consumer-investors actually interact – in the lab, I create a rich, but simple, environment where investor-consumers make consumption and investment decisions and can construct expectations about their own idiosyncratic income processes, the future “state of 3 the world”, and future prices and dividends of risky assets. Fundamentally, consumer-investors should really only care about consumption; and prices should re‡ect that. In this paper, therefore, I test these fundamental ideas of asset pricing models in a controlled, but contextualized, setting. Modelling Macroprudential Policies in Basel III. Work in Progress. – This paper examines countercyclical capital regulations through a DSGE model designed to incorporate aspects of heterogeneity (for both banks and assets) when modelling the macroeconomic impacts of countercyclical bu¤ ers (as part of the macroprudential policies that came out of Basel III) and the role of monetary policy. Key features of the model under study include multi-period (long-lived) assets, heterogeneous banks, and potential recognition and policy implementation lags. (This project is still in very early stages.) Bank Runs and TBTF, with J. Pereira dos Santos. Work in Progress. – Behavioral responses to macroprudential policies currently being designed to support system-wide …nancial stability are important –but many are largely unexplored. Our research takes a …rst step in exploring deposit taxation. While a “surprise”tax on deposits has struck many as being unfair, the stronger notion that bank deposits are somehow “fundamentally sacred” also seems wrong. In this paper, we investigate through a series of lab experiments what happens to depositor con…dence if – when a bank is stressed, but not yet insolvent – existing deposits are taxed. We hypothesize that this kind of stop-gap policy, which could result in small – but not total – losses for depositors and investors, might restore con…dence. In this paper, therefore, we study how an endogenous mechanism designed to tax deposits in periods of bank stress might provide a “market solution” to the well-known problems surrounding "Too Big to Fail". (This project is still in very early stages.) Stackelberg Security Games with Uncertainty: Motivations from the Piracy Problem, with C. Holt. Work in Progress. – What happens to the frequency of (terrorist, piracy, etc.) attacks when there is uncertainty about defensive deterrence postures? Can attacks be deterred, instead of just diverted to less well-defended locations? Preliminary results suggest that the answer is yes. We use a gametheoretic model for the strategic interactions between defenders (leaders) and attackers (followers) and incorporate uncertainty in the second stage regarding the visibility of the defense strategy. While solutions to standard Stackelberg games assume that when the follower (here, the attacker) is indi¤ erent between strategies, he will break the tie in the leader’s (here, the defender’s) favor, this is not a reasonable assumption for security games. Our theoretic solution concept, therefore, is one that retains all possible equilibria; and we use experimental investigations to explore what, if anything, can be said about which equilibrium strategies might be more likely, and which can or cannot be ruled out. Computer simulations that assume "tie-breaking" in favor of the leader show that leaders do better from commitment as observation probabilities increase; but the results in these experiments indicate the opposite. In our experiments, the leaders (defenders) do better when either the revelation probability decreases or when they choose to make the environment appear more uncertain than it really is by strategically not defending. Additional Information Citizenship: U.S. Languages: English (native), French (basic), Russian (basic) Programming: MATLAB, Fortran, C/C++, Visual Basic, Stata, z-Tree 4