Discussion of Relationship and Transaction Lending in a Crisis

Size: px
Start display at page:

Download "Discussion of Relationship and Transaction Lending in a Crisis"

Transcription

1 Discussion of Relationship and Transaction Lending in a Crisis Philipp Schnabl NYU Stern, CEPR, and NBER USC Conference December 14, 2013

2 Summary 1 Research Question How does relationship lending vary over the business cycle? 2 Methodology 3 Results Develop model of relationship lending after an aggregate shock Empirically analyze relationship lending using Italian lending data from the 2008 financial crisis Model predicts that relationship lenders charge higher spreads during normal times and lower ones during bad times Find empirical support using within-firm and within-bank estimator

3 Overview Contribution 1 First to explore the role of relationship lending during crises 2 Provides a testable model of multiple lending relationships 3 Uses within-firm and within-bank estimator in a novel setting Discussion 1 Provide intuition on the role of multiple lending relationships 2 Discuss identification strategy using within-estimator

4 Time Line: Transaction Bank Only t=0 t=1 t=2 Bank observes firmspecific risk p and offer competitive interest rate r 0 (p) Aggregate state S is realized Firm payoff is realized Firm payoff is realized and cash flows are distributed Success Failure Firm pays r 0 (p) Liquidation Roll-over Cannot observe type (H,L) Offers roll-over at interest rate r 1 (p,s)

5 Transaction Banks Only Bank offers a roll-over at rate r 1 (p, S) iff: r 0 (p) = E[r 1 (p, S)] V H υ s 1 Firm cannot promise more than pledgable income V H υ s 2 Perfect competition equalizes time-0 and time-1 interest rate 3 Time-0 lender cannot renegotiate (needs to be paid off in full) Creates a debt overhang problem at roll-over 1 If time-0 interest rate r 0 (p) is too high, there is no roll-over in the bad state 2 Leads to inefficient liquidation

6 Transaction Bank Only Interest rate r(p) at time 0 High risk firms (default in bad aggregate state) p Low risk firms (always repay) Firm-specific risk p

7 Multiple Lending Relationships Assumptions: 1 Assume T-banks have lower funding cost than R-banks firms prefer borrowing from T-Banks 2 R-banks can prevent debt overhang firms borrow to provide R-banks an incentive for monitoring at time 1 Equilibrium: 1 Firms borrow just enough from R-banks to prevent debt overhang 2 All roll-overs are done by R-banks; charge lower interest rate than T-bank during crises 3 If R-bank refuses roll-over, firm must be L-type and is liquidated No debt overhang with both T- and R-banks

8 Comment: Debt overhang in T-Lending Debt overhang is usually associated with arm s-length financing and dispersed holdings Not entirely clear how to think about this in traditional banking Probably most applicable to loan products that are eventually sold or securitized (e.g., syndicated loans) More discussion on role of debt overhang for empirical tests

9 Identification strategy Natural Experiment from Italy Use Lehman default as exogenous shock to Italian Banks Exploit credit registry data that covers all firm-bank relationships Identify T-lending based on informational distance (bank and firm headquartered in the same region) Naive estimator: FirmOutcome i,t = α i + delta t + βtbank i,t Crisis t + ɛ Identification concern: Bank-firm matching proxies for firm quality

10 Identification strategy Solution: Estimate effect of T-banking at loan-level (not firm-level) Use within-firm and within-bank estimator: FirmOutcome i,b,t = α it + γ bt + βtbank i,b,t Crisis t + ɛ 1 α it controls for all firm-level shocks (e.g., change in investment opportunities) 2 γ bt controls for all bank-level shocks (e.g., exposure to int l funding markets) Implemented using separate estimation by year

11 T-banks charge lower spreads during bad times (Table 3) Table 3 T-banking and R-banking in good times and bad times Variables Interest rate good time (2007:q2) (I) Interest rate bad time (2010:q1) (II) Log Loans good time (2007:q2) (III) Log Loans bad time (2010:q1) (IV) T-Bank *** *** *** *** (0.0174) (0.0210) (0.0123) (0.0110) Bank fixed effects yes yes yes yes Firm fixed effects yes yes yes yes Number of obs. 184, , , ,859 Adjusted R-squared Notes: The models in column (I) and (III) are estimated in 2007:q2; those in columns (II) and (IV) in 2010:q1. The dummy T-Bank takes the value of 1 if the loan is granted by a transactional bank. The coefficients represent the difference relative to relationship banking (R-banks). Parameter estimates are reported with robust standard errors in brackets (cluster at individual firm level). The symbols *, **, and during *** represent regular significance times levels of 10%, 5%, and 1% respectively. Coefficients for fixed effects are not reported. T-banks charge lower spreads during normal times and higher ones T-banks loan size is smaller during regular times

12 Comment: Extensive Margin of Lending Theory predicts that T-banks stop lending But analysis appears to be conditional on the loan relationship being in the data pre and post-lehman Can induce large sample bias during a crisis in which many banks stop lending Analyze extensive margin of lending

13 Comment: Estimate in one regression Two time periods are measured separately But explanatory variable (T-Bank) should be measured prior to the shock Does not measure change in lending for the same firm Estimate two time periods in one regression

14 Conclusion Novel model on relationship lending 1 First paper to analyze relationship lending after a crisis 2 Incorporates multiple lending relationships Main comments 1 Discussion of debt overhang assumption for empirical test 2 Also analyze extensive margin and estimate in one regression

Discussion of: Banks Incentives and Quality of Internal Risk Models

Discussion of: Banks Incentives and Quality of Internal Risk Models Discussion of: Banks Incentives and Quality of Internal Risk Models by Matthew C. Plosser and Joao A. C. Santos Philipp Schnabl 1 1 NYU Stern, NBER and CEPR Chicago University October 2, 2015 Motivation

More information

Who Borrows from the Lender of Last Resort? 1

Who Borrows from the Lender of Last Resort? 1 Who Borrows from the Lender of Last Resort? 1 Itamar Drechsler, Thomas Drechsel, David Marques-Ibanez and Philipp Schnabl NYU Stern and NBER ECB NYU Stern, CEPR, and NBER November 2012 1 The views expressed

More information

The Distributive Impact of Reforms in Credit Enforcement: Evidence from Indian Debt Recovery Tribunals

The Distributive Impact of Reforms in Credit Enforcement: Evidence from Indian Debt Recovery Tribunals The Distributive Impact of Reforms in Credit Enforcement: Evidence from Indian Debt Recovery Tribunals Stockholm School of Economics Dilip Mookherjee Boston University Sujata Visaria Boston University

More information

Firing Costs, Employment and Misallocation

Firing Costs, Employment and Misallocation Firing Costs, Employment and Misallocation Evidence from Randomly Assigned Judges Omar Bamieh University of Vienna November 13th 2018 1 / 27 Why should we care about firing costs? Firing costs make it

More information

António Afonso, Jorge Silva Debt crisis and 10-year sovereign yields in Ireland and in Portugal

António Afonso, Jorge Silva Debt crisis and 10-year sovereign yields in Ireland and in Portugal Department of Economics António Afonso, Jorge Silva Debt crisis and 1-year sovereign yields in Ireland and in Portugal WP6/17/DE/UECE WORKING PAPERS ISSN 183-181 Debt crisis and 1-year sovereign yields

More information

Online Appendix for How Much do Idiosyncratic Bank. Shocks Affect Investment? Evidence from Matched. Bank-Firm Loan Data

Online Appendix for How Much do Idiosyncratic Bank. Shocks Affect Investment? Evidence from Matched. Bank-Firm Loan Data Online Appendix for How Much do Idiosyncratic Bank Shocks Affect Investment? Evidence from Matched Bank-Firm Loan Data September 6, 2016 Contents 1 Overview 1 2 Economic Foundations 3 2.1 Deriving Equation

More information

Private Leverage and Sovereign Default

Private Leverage and Sovereign Default Private Leverage and Sovereign Default Cristina Arellano Yan Bai Luigi Bocola FRB Minneapolis University of Rochester Northwestern University Economic Policy and Financial Frictions November 2015 1 / 37

More information

Competition and the pass-through of unconventional monetary policy: evidence from TLTROs

Competition and the pass-through of unconventional monetary policy: evidence from TLTROs Competition and the pass-through of unconventional monetary policy: evidence from TLTROs M. Benetton 1 D. Fantino 2 1 London School of Economics and Political Science 2 Bank of Italy Boston Policy Workshop,

More information

The Changing Role of Small Banks. in Small Business Lending

The Changing Role of Small Banks. in Small Business Lending The Changing Role of Small Banks in Small Business Lending Lamont Black Micha l Kowalik January 2016 Abstract This paper studies how competition from large banks affects small banks lending to small businesses.

More information

Credit Market Competition and Liquidity Crises

Credit Market Competition and Liquidity Crises Credit Market Competition and Liquidity Crises Elena Carletti Agnese Leonello European University Institute and CEPR University of Pennsylvania May 9, 2012 Motivation There is a long-standing debate on

More information

A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk

A Pyrrhic Victory? Bank Bailouts and Sovereign Credit Risk Viral Acharya, Itamar Drechsler and Philipp Schnabl NYU Stern NBER, CEPR, and NYU Stern Global Research Forum on International Macroeconomics and Finance Questions 1 Did financial sector bailouts ignite

More information

Dollar Funding and the Lending Behavior of Global Banks

Dollar Funding and the Lending Behavior of Global Banks Dollar Funding and the Lending Behavior of Global Banks Victoria Ivashina (with David Scharfstein and Jeremy Stein) Facts US dollar assets of foreign banks are very large - Foreign banks play a major role

More information

Debt Overhang, Rollover Risk, and Investment in Europe

Debt Overhang, Rollover Risk, and Investment in Europe Debt Overhang, Rollover Risk, and Investment in Europe Ṣebnem Kalemli-Özcan, University of Maryland, CEPR and NBER Luc Laeven, ECB and CEPR David Moreno, University of Maryland September 2015, EC Post

More information

FOREIGN FUND FLOWS AND STOCK RETURNS: EVIDENCE FROM INDIA

FOREIGN FUND FLOWS AND STOCK RETURNS: EVIDENCE FROM INDIA FOREIGN FUND FLOWS AND STOCK RETURNS: EVIDENCE FROM INDIA Viral V. Acharya (NYU-Stern, CEPR and NBER) V. Ravi Anshuman (IIM Bangalore) K. Kiran Kumar (IIM Indore) 5 th IGC-ISI India Development Policy

More information

Banks as Patient Lenders: Evidence from a Tax Reform

Banks as Patient Lenders: Evidence from a Tax Reform Banks as Patient Lenders: Evidence from a Tax Reform Elena Carletti Filippo De Marco Vasso Ioannidou Enrico Sette Bocconi University Bocconi University Lancaster University Banca d Italia Investment in

More information

The Deposits Channel of Monetary Policy

The Deposits Channel of Monetary Policy The Deposits Channel of Monetary Policy Itamar Drechsler, Alexi Savov, and Philipp Schnabl First draft: November 2014 This draft: January 2015 Abstract We propose and test a new channel for the transmission

More information

Credit Allocation under Economic Stimulus: Evidence from China. Discussion

Credit Allocation under Economic Stimulus: Evidence from China. Discussion Credit Allocation under Economic Stimulus: Evidence from China Discussion Simon Gilchrist New York University and NBER MFM January 25th, 2018 Broad Facts for China (Pre 2008) Aggregate investment rate

More information

Intermediation and Voluntary Exposure to Counterparty Risk

Intermediation and Voluntary Exposure to Counterparty Risk Intermediation and Voluntary Exposure to Counterparty Risk Maryam Farboodi 6th Banco de Portugal Conference on Financial Intermediation July 2015 1 / 21 Motivation Degree of interconnectedness among financial

More information

Stock Liquidity and Default Risk *

Stock Liquidity and Default Risk * Stock Liquidity and Default Risk * Jonathan Brogaard Dan Li Ying Xia Internet Appendix A1. Cox Proportional Hazard Model As a robustness test, we examine actual bankruptcies instead of the risk of default.

More information

The Labor Market Consequences of Adverse Financial Shocks

The Labor Market Consequences of Adverse Financial Shocks The Labor Market Consequences of Adverse Financial Shocks November 2012 Unemployment rate on the two sides of the Atlantic Credit to the private sector over GDP Credit to private sector as a percentage

More information

A Loan-level Analysis of The Determinants of Credit Growth and The Bank Lending Channel in Peru

A Loan-level Analysis of The Determinants of Credit Growth and The Bank Lending Channel in Peru A Loan-level Analysis of The Determinants of Credit Growth and The Bank Lending Channel in Peru Central Bank of Peru José Bustamante Walter Cuba Julio Tambini Monetary Operations and Financial Stability

More information

The Value of Information in Relationship Lending

The Value of Information in Relationship Lending The Value of Information in Relationship Lending Nicola Pavanini, Fabiano Schivardi March 2016 Preliminary and incomplete. Please do not quote. Abstract In this paper we investigate whether relationship

More information

Specialization in Bank Lending: Evidence from Exporting Firms

Specialization in Bank Lending: Evidence from Exporting Firms Specialization in Bank Lending: Evidence from Exporting Firms Daniel Paravisini (LSE), Veronica Rappoport (LSE), and Philipp Schnabl (NYU) November 2016 Conventional Wisdom in (Academic) Banking Do banks

More information

Lending Supply and Unnatural Selection: An Analysis of Bank-Firm Relationships in Italy After Lehman

Lending Supply and Unnatural Selection: An Analysis of Bank-Firm Relationships in Italy After Lehman Lending Supply and Unnatural Selection: An Analysis of Bank-Firm Relationships in Italy After Lehman Ugo Albertazzi and Domenico J. Marchetti Banca d Italia, Economic Outlook and Monetary Policy Dept.

More information

How did the Financial Crisis affect Bank Credit Supply and the Real Economy? Bank-Firm-level evidence from Austria

How did the Financial Crisis affect Bank Credit Supply and the Real Economy? Bank-Firm-level evidence from Austria How did the 2008-9 Financial Crisis affect Bank Credit Supply and the Real Economy? Bank-Firm-level evidence from Austria Paul Pelzl a and María Teresa Valderrama b a Tinbergen Institute (TI), Vrije Universiteit

More information

A Macroeconomic Model with Financial Panics

A Macroeconomic Model with Financial Panics A Macroeconomic Model with Financial Panics Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino NYU, Princeton, Federal Reserve Board 1 March 218 1 The views expressed in this paper are those of the authors

More information

Deposit Insurance and Banks Deposit Rates: Evidence From a EU Policy

Deposit Insurance and Banks Deposit Rates: Evidence From a EU Policy Deposit Insurance and Banks Deposit Rates: Evidence From a EU Policy Matteo Gatti Tommaso Oliviero EUI University of Naples and CEF May 1, 2017 Motivation In 2009 EU raised deposit insurance limit to e100,

More information

Peer Effects in Retirement Decisions

Peer Effects in Retirement Decisions Peer Effects in Retirement Decisions Mario Meier 1 & Andrea Weber 2 1 University of Mannheim 2 Vienna University of Economics and Business, CEPR, IZA Meier & Weber (2016) Peers in Retirement 1 / 35 Motivation

More information

Capital Constraints, Counterparty Risk and Deviations from Covered Interest Rate Parity *

Capital Constraints, Counterparty Risk and Deviations from Covered Interest Rate Parity * Capital Constraints, Counterparty Risk and Deviations from Covered Interest Rate Parity * by Niall Coffey, Warren Hrung, Hoai-Luu Nguyen, and Asani Sarkar Comments by Richard M. Levich NYU Stern School

More information

Shocks vs Structure:

Shocks vs Structure: Shocks vs Structure: Explaining Differences in Exchange Rate Pass-Through Across Countries and Time Kristin Forbes: MIT, NBER & CEPR Ida Hjortsoe: Bank of England& CEPR Tsvetelina Nenova: LBS ECB Conference

More information

Syndication, Interconnectedness, and Systemic Risk

Syndication, Interconnectedness, and Systemic Risk Syndication, Interconnectedness, and Systemic Risk Jian Cai 1 Anthony Saunders 2 Sascha Steffen 3 1 Fordham University 2 NYU Stern School of Business 3 ESMT European School of Management and Technology

More information

The Effect of a Longer Working Horizon on Individual and Family Labour Supply

The Effect of a Longer Working Horizon on Individual and Family Labour Supply The Effect of a Longer Working Horizon on Individual and Family Labour Supply Francesca Carta Marta De Philippis Bank of Italy December 1, 2017 Paris, ASME BdF Labour Market Conference Motivation: delaying

More information

Market Microstructure Invariants

Market Microstructure Invariants Market Microstructure Invariants Albert S. Kyle and Anna A. Obizhaeva University of Maryland TI-SoFiE Conference 212 Amsterdam, Netherlands March 27, 212 Kyle and Obizhaeva Market Microstructure Invariants

More information

Does Macro-Pru Leak? Empirical Evidence from a UK Natural Experiment

Does Macro-Pru Leak? Empirical Evidence from a UK Natural Experiment 12TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 10 11, 2011 Does Macro-Pru Leak? Empirical Evidence from a UK Natural Experiment Shekhar Aiyar International Monetary Fund Charles W. Calomiris Columbia

More information

Why Are Banks Not Recapitalized During Crises?

Why Are Banks Not Recapitalized During Crises? Why Are Banks Not Recapitalized During Crises? Matteo Crosignani NYU Stern September 2014 Outline 1 THREE FACTS 2 INTUITION 3 MODEL 4 EMPIRICAL EVIDENCE FACT 1: RELIANCE ON DOMESTIC BANKS Levels Non-GIIPS

More information

Discussion of Corporate Bond Liquidity Before and After the Onset of the Subprime Crisis by J. Dick-Nielsen, P. Feldhütter, D.

Discussion of Corporate Bond Liquidity Before and After the Onset of the Subprime Crisis by J. Dick-Nielsen, P. Feldhütter, D. Discussion of Corporate Bond Liquidity Before and After the Onset of the Subprime Crisis by J. Dick-Nielsen, P. Feldhütter, D. Lando Discussant: Loriano Mancini Swiss Finance Institute at EPFL Swissquote

More information

International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending

International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending MPRA Munich Personal RePEc Archive International Shock Transmission after the Lehman Brothers Collapse. Evidence from Syndicated Lending Ralph de Haas and Neeltje van Horen European Bank for Reconstruction

More information

The (Unintended?) Consequences of the Largest Liquidity Injection Ever

The (Unintended?) Consequences of the Largest Liquidity Injection Ever The (Unintended?) Consequences of the Largest Liquidity Injection Ever Matteo Crosignani Miguel Faria-e-Castro Luís Fonseca NYU Stern NYU LBS 16 April 2016 Third International Conference on Sovereign Bond

More information

Credit Misallocation During the Financial Crisis

Credit Misallocation During the Financial Crisis Credit Misallocation During the Financial Crisis Fabiano Schivardi 1 Enrico Sette 2 Guido Tabellini 3 1 LUISS and EIEF 2 Banca d Italia 3 Bocconi 4th Conference on Bank Performance, Financial Stability

More information

Sovereign default and debt renegotiation

Sovereign default and debt renegotiation Sovereign default and debt renegotiation Authors Vivian Z. Yue Presenter José Manuel Carbó Martínez Universidad Carlos III February 10, 2014 Motivation Sovereign debt crisis 84 sovereign default from 1975

More information

LECTURE 11 The Effects of Credit Contraction and Financial Crises: Credit Market Disruptions. November 28, 2018

LECTURE 11 The Effects of Credit Contraction and Financial Crises: Credit Market Disruptions. November 28, 2018 Economics 210c/236a Fall 2018 Christina Romer David Romer LECTURE 11 The Effects of Credit Contraction and Financial Crises: Credit Market Disruptions November 28, 2018 I. OVERVIEW AND GENERAL ISSUES Effects

More information

Import Competition and Household Debt

Import Competition and Household Debt Import Competition and Household Debt Barrot (MIT) Plosser (NY Fed) Loualiche (MIT) Sauvagnat (Bocconi) USC Spring 2017 The views expressed in this paper are those of the authors and do not necessarily

More information

The Labor Market Consequences of Adverse Financial Shocks

The Labor Market Consequences of Adverse Financial Shocks 13TH JACQUES POLAK ANNUAL RESEARCH CONFERENCE NOVEMBER 8 9, 2012 The Labor Market Consequences of Adverse Financial Shocks Tito Boeri Bocconi University and frdb Pietro Garibaldi University of Torino and

More information

Foreign Currency Debt, Financial Crises and Economic Growth : A Long-Run Exploration

Foreign Currency Debt, Financial Crises and Economic Growth : A Long-Run Exploration Foreign Currency Debt, Financial Crises and Economic Growth : A Long-Run Exploration Michael D. Bordo Rutgers University and NBER Christopher M. Meissner UC Davis and NBER GEMLOC Conference, World Bank,

More information

Demand Effects and Speculation in Oil Markets: Theory and Evidence

Demand Effects and Speculation in Oil Markets: Theory and Evidence Demand Effects and Speculation in Oil Markets: Theory and Evidence Eyal Dvir (BC) and Ken Rogoff (Harvard) IMF - OxCarre Conference, March 2013 Introduction Is there a long-run stable relationship between

More information

LECTURE 9 The Effects of Credit Contraction: Credit Market Disruptions. October 19, 2016

LECTURE 9 The Effects of Credit Contraction: Credit Market Disruptions. October 19, 2016 Economics 210c/236a Fall 2016 Christina Romer David Romer LECTURE 9 The Effects of Credit Contraction: Credit Market Disruptions October 19, 2016 I. OVERVIEW AND GENERAL ISSUES Effects of Credit Balance-sheet

More information

The relation between bank losses & loan supply an analysis using panel data

The relation between bank losses & loan supply an analysis using panel data The relation between bank losses & loan supply an analysis using panel data Monika Turyna & Thomas Hrdina Department of Economics, University of Vienna June 2009 Topic IMF Working Paper 232 (2008) by Erlend

More information

Online Appendix to R&D and the Incentives from Merger and Acquisition Activity *

Online Appendix to R&D and the Incentives from Merger and Acquisition Activity * Online Appendix to R&D and the Incentives from Merger and Acquisition Activity * Index Section 1: High bargaining power of the small firm Page 1 Section 2: Analysis of Multiple Small Firms and 1 Large

More information

Mining closures, gender, and employment reallocations: the case of UK coal mines

Mining closures, gender, and employment reallocations: the case of UK coal mines Mining closures, gender, and employment reallocations: the case of UK coal mines Fernando Aragon (SFU), Juan Pablo Rud (Royal Holloway) and Gerhard Toews (Oxcarre) November 24, 2016 Collapse In December

More information

Internet Appendix for: Cyclical Dispersion in Expected Defaults

Internet Appendix for: Cyclical Dispersion in Expected Defaults Internet Appendix for: Cyclical Dispersion in Expected Defaults March, 2018 Contents 1 1 Robustness Tests The results presented in the main text are robust to the definition of debt repayments, and the

More information

TABLE I SUMMARY STATISTICS Panel A: Loan-level Variables (22,176 loans) Variable Mean S.D. Pre-nuclear Test Total Lending (000) 16,479 60,768 Change in Log Lending -0.0028 1.23 Post-nuclear Test Default

More information

Craft Lending: The Role of Small Banks in Small Business Finance

Craft Lending: The Role of Small Banks in Small Business Finance Craft Lending: The Role of Small Banks in Small Business Finance Lamont Black Micha l Kowalik December 2016 Abstract This paper shows the craft nature of small banks lending to small businesses when small

More information

The Run for Safety: Financial Fragility and Deposit Insurance

The Run for Safety: Financial Fragility and Deposit Insurance The Run for Safety: Financial Fragility and Deposit Insurance Rajkamal Iyer- Imperial College, CEPR Thais Jensen- Univ of Copenhagen Niels Johannesen- Univ of Copenhagen Adam Sheridan- Univ of Copenhagen

More information

Capital Structure and the 2001 Recession

Capital Structure and the 2001 Recession Capital Structure and the 2001 Recession Richard H. Fosberg Dept. of Economics Finance & Global Business Cotaskos College of Business William Paterson University 1600 Valley Road Wayne, NJ 07470 USA Abstract

More information

Firm Dynamics and Financial Development

Firm Dynamics and Financial Development Federal Reserve Bank of Minneapolis Research Department Staff Report 392 Revised July 2009 Firm Dynamics and Financial Development Cristina Arellano Federal Reserve Bank of Minneapolis, University of Minnesota,

More information

Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach

Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach Gianluca Benigno 1 Andrew Foerster 2 Christopher Otrok 3 Alessandro Rebucci 4 1 London School of Economics and

More information

Corporate Strategy, Conformism, and the Stock Market

Corporate Strategy, Conformism, and the Stock Market Corporate Strategy, Conformism, and the Stock Market Thierry Foucault (HEC) Laurent Frésard (Maryland) November 20, 2015 Corporate Strategy, Conformism, and the Stock Market Thierry Foucault (HEC) Laurent

More information

DISCUSSION. The causal effect of credit guarantees for SMEs: evidence from Italy. by Alessio D Ignazio and Carlo Menon

DISCUSSION. The causal effect of credit guarantees for SMEs: evidence from Italy. by Alessio D Ignazio and Carlo Menon DISCUSSION The causal effect of credit guarantees for SMEs: evidence from Italy by Alessio D Ignazio and Carlo Menon Inga Heiland Ifo Institute, Munich 18/10/2013 Discussion of the causal effect of credit

More information

Discussion: Reallocation of banks' portfolio during a liquidity shock: Evidence from the 2007 and 2009 financial crisis by P. Pessarossi and F.

Discussion: Reallocation of banks' portfolio during a liquidity shock: Evidence from the 2007 and 2009 financial crisis by P. Pessarossi and F. Discussion: Reallocation of banks' portfolio during a liquidity shock: Evidence from the 2007 and 2009 financial crisis by P. Pessarossi and F. Vinas Mira LAMRIBEN* 3 rd EBA Policy Research Workshop -

More information

Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans

Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans Viral V. Acharya a, Tim Eisert b, Christian Eufinger b, Christian Hirsch c a New York University, CEPR, and NBER b Goethe

More information

The simple monetarist model (inflation as a function of money supply growth and real GDP growth) seems to have been followed by the RBI in its

The simple monetarist model (inflation as a function of money supply growth and real GDP growth) seems to have been followed by the RBI in its Inflation, Growth and Monetary Policy Surjit S Bhalla, Jan 9, 2009 Prepared for NBER Neemrana Conference, Jan 10-13, 13, 2009 What determines inflation a historical view The simple monetarist model (inflation

More information

The Loan Covenant Channel: How Bank Health Transmits to the Real Economy

The Loan Covenant Channel: How Bank Health Transmits to the Real Economy The Loan Covenant Channel: How Bank Health Transmits to the Real Economy Discussant: Marcel Jansen Universidad Autónoma de Madrid First Conference on Financial Stability Bank of Spain, 24-25 May 2017 Marcel

More information

Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time

Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time Small Bank Comparative Advantages in Alleviating Financial Constraints and Providing Liquidity Insurance over Time Allen N. Berger University of South Carolina Wharton Financial Institutions Center European

More information

The Two Faces of Cross-Border Banking Flows

The Two Faces of Cross-Border Banking Flows The Two Faces of Cross-Border Banking Flows Dennis Reinhardt (Bank of England) and Steven J. Riddiough (University of Melbourne) 7 May 2016 3rd BIS-CGFS workshop on Research on global financial stability:

More information

Optimal Debt and Profitability in the Tradeoff Theory

Optimal Debt and Profitability in the Tradeoff Theory Optimal Debt and Profitability in the Tradeoff Theory Andrew B. Abel discussion by Toni Whited Tepper-LAEF Conference This paper presents a tradeoff model in which leverage is negatively related to profits!

More information

Sustainable Financial Obligations and Crisis Cycles

Sustainable Financial Obligations and Crisis Cycles Sustainable Financial Obligations and Crisis Cycles Mikael Juselius and Moshe Kim 220 200 180 160 140 120 (a) U.S. household sector total debt to income. 10 8 6 4 2 0 2 (b) Nominal (solid line) and real

More information

The Effect of Central Bank Liquidity Injections on Bank Credit Supply

The Effect of Central Bank Liquidity Injections on Bank Credit Supply The Effect of Central Bank Liquidity Injections on Bank Credit Supply Luisa Carpinelli Bank of Italy Matteo Crosignani Federal Reserve Board AFA Meetings Banks and Central Banks Session Chicago, 8 January

More information

Online Appendix. Banks, Government Bonds, and Default: What do the Data Say?

Online Appendix. Banks, Government Bonds, and Default: What do the Data Say? Online Appendix Banks, Government Bonds, and Default: What do the Data Say? Nicola Gennaioli, Alberto Martin, and Stefano Rossi This Online Appendix presents the details of a number of analyses and robustness

More information

Are Lemon s Sold First? Dynamic Signaling in the Mortgage Market. Online Appendix

Are Lemon s Sold First? Dynamic Signaling in the Mortgage Market. Online Appendix Are Lemon s Sold First? Dynamic Signaling in the Mortgage Market Online Appendix Manuel Adelino, Kristopher Gerardi and Barney Hartman-Glaser This appendix supplements the empirical analysis and provides

More information

Specialization in Bank Lending: Evidence from Exporting Firms

Specialization in Bank Lending: Evidence from Exporting Firms Specialization in Bank Lending: Evidence from Exporting Firms Daniel Paravisini Veronica Rappoport Philipp Schnabl LSE, CEPR, BREAD LSE, CEP, CEPR NYU Stern, NBER, CEPR October 10, 2017 Abstract We develop

More information

Capital Structure with Endogenous Liquidation Values

Capital Structure with Endogenous Liquidation Values 1/22 Capital Structure with Endogenous Liquidation Values Antonio Bernardo and Ivo Welch UCLA Anderson School of Management September 2014 Introduction 2/22 Liquidation values are an important determinant

More information

Financial Shocks in Production Chains

Financial Shocks in Production Chains Financial Shocks in Production Chains Sebnem Kalemli-Ozcan Se-Jik Kim Hyun Song Shin Bent E. Sørensen Sevcan Yesiltas ESSIM Tarragona May 2014 Production networks in economics Plan of paper: Outline stylized

More information

Ownership, Concentration and Investment

Ownership, Concentration and Investment Ownership, Concentration and Investment Germán Gutiérrez and Thomas Philippon January 2018 Abstract The US business sector has under-invested relative to profits, funding costs, and Tobin s Q since the

More information

Growth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns

Growth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns Growth Opportunities, Investment-Specific Technology Shocks and the Cross-Section of Stock Returns Leonid Kogan 1 Dimitris Papanikolaou 2 1 MIT and NBER 2 Northwestern University Boston, June 5, 2009 Kogan,

More information

The Deposits Channel of Monetary Policy

The Deposits Channel of Monetary Policy The Deposits Channel of Monetary Policy Itamar Drechsler, Alexi Savov, and Philipp Schnabl First draft: November 2014 This draft: March 2015 Abstract We propose and test a new channel for the transmission

More information

Craft Lending: The Role of Small Banks in Small Business Lending

Craft Lending: The Role of Small Banks in Small Business Lending Craft Lending: The Role of Small Banks in Small Business Lending Lamont Black (DePaul) and Micha Kowalik (FRB of Boston) those of the author and do not necessarily represent those of the Federal Reserve

More information

Credit Misallocation During the Financial Crisis

Credit Misallocation During the Financial Crisis Credit Misallocation During the Financial Crisis Fabiano Schivardi 1 Enrico Sette 2 Guido Tabellini 3 1 Bocconi and EIEF 2 Banca d Italia 3 Bocconi ABFER Specialty Conference Financial Regulations: Intermediation,

More information

Credit-Induced Boom and Bust

Credit-Induced Boom and Bust Credit-Induced Boom and Bust Marco Di Maggio (Columbia) and Amir Kermani (UC Berkeley) 10th CSEF-IGIER Symposium on Economics and Institutions June 25, 2014 Prof. Marco Di Maggio 1 Motivation The Great

More information

Fat Leftovers: Political Budget Cycle and Payments on Arrears

Fat Leftovers: Political Budget Cycle and Payments on Arrears Fat Leftovers: Political Budget Cycle and Payments on Arrears Luciano Greco Luigi Moretti May 2016 Preliminary and Incomplete Draft Please do not cite, quote, or upload online without authors permission

More information

Unconventional Monetary Policy and Bank Lending Relationships

Unconventional Monetary Policy and Bank Lending Relationships Unconventional Monetary Policy and Bank Lending Relationships Christophe Cahn 1 Anne Duquerroy 1 William Mullins 2 1 Banque de France 2 University of Maryland BdF-BdI Workshop - June 9, 2017 1 / 43 Motivation

More information

We follow Agarwal, Driscoll, and Laibson (2012; henceforth, ADL) to estimate the optimal, (X2)

We follow Agarwal, Driscoll, and Laibson (2012; henceforth, ADL) to estimate the optimal, (X2) Online appendix: Optimal refinancing rate We follow Agarwal, Driscoll, and Laibson (2012; henceforth, ADL) to estimate the optimal refinance rate or, equivalently, the optimal refi rate differential. In

More information

Financial Liberalization and Neighbor Coordination

Financial Liberalization and Neighbor Coordination Financial Liberalization and Neighbor Coordination Arvind Magesan and Jordi Mondria January 31, 2011 Abstract In this paper we study the economic and strategic incentives for a country to financially liberalize

More information

On the Spillover of Exchange-Rate Risk into Default Risk! Miloš Božović! Branko Urošević! Boško Živković!

On the Spillover of Exchange-Rate Risk into Default Risk! Miloš Božović! Branko Urošević! Boško Živković! On the Spillover of Exchange-Rate Risk into Default Risk! Miloš Božović! Branko Urošević! Boško Živković! 2 Motivation Globalization and inflow of foreign capital Dollarization in emerging economies o

More information

Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis

Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis Bank Rescues and Bailout Expectations: The Erosion of Market Discipline During the Financial Crisis Florian Hett Goethe University Frankfurt Alexander Schmidt Deutsche Bundesbank & Goethe University Frankfurt

More information

Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations 1

Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations 1 Stock Market Cross-Sectional Skewness and Business Cycle Fluctuations 1 2 nd CEBRA International Finance and Macroeconomics Meeting Risk, Volatility and Central Bank s Policies Madrid November 2018 1 The

More information

Counterparty risk externality: Centralized versus over-the-counter markets. Presentation at Stanford Macro, April 2011

Counterparty risk externality: Centralized versus over-the-counter markets. Presentation at Stanford Macro, April 2011 : Centralized versus over-the-counter markets Viral Acharya Alberto Bisin NYU-Stern, CEPR and NBER NYU and NBER Presentation at Stanford Macro, April 2011 Introduction OTC markets have often been at the

More information

The Nexus of Monetary Policy and Shadow Banking in China 1

The Nexus of Monetary Policy and Shadow Banking in China 1 The Nexus of Monetary Policy and Shadow Banking in China 1 Kaiji Chen a, Jue Ren b, and Tao Zha c a Emory University b Texas Christian University c FRB Atlanta, Emory University, and NBER MFM Conference

More information

Imperfect Transparency and the Risk of Securitization

Imperfect Transparency and the Risk of Securitization Imperfect Transparency and the Risk of Securitization Seungjun Baek Florida State University June. 16, 2017 1. Introduction Motivation Study benefit and risk of securitization Motivation Study benefit

More information

CORPORATE TAX INCENTIVES AND CAPITAL STRUCTURE: EVIDENCE FROM UK TAX RETURN DATA

CORPORATE TAX INCENTIVES AND CAPITAL STRUCTURE: EVIDENCE FROM UK TAX RETURN DATA CORPORATE TAX INCENTIVES AND CAPITAL STRUCTURE: EVIDENCE FROM UK TAX RETURN DATA Jing Xing, Giorgia Maffini, and Michael Devereux Centre for Business Taxation Saïd Business School University of Oxford

More information

Debt Overhang, Rollover Risk, and Investment in Europe

Debt Overhang, Rollover Risk, and Investment in Europe Debt Overhang, Rollover Risk, and Investment in Europe Ṣebnem Kalemli-Özcan, University of Maryland, CEPR and NBER Luc Laeven, ECB and CEPR David Moreno, University of Maryland June 9, 2015 Corporate Investment/GDP

More information

The Effect of Mortgage Broker Licensing On Loan Origination Standards and Defaults: Evidence from U.S. Mortgage Market

The Effect of Mortgage Broker Licensing On Loan Origination Standards and Defaults: Evidence from U.S. Mortgage Market The Effect of Mortgage Broker Licensing On Loan Origination Standards and Defaults: Evidence from U.S. Mortgage Market Lan Shi lshi@urban.org Yan (Jenny) Zhang Yan.Zhang@occ.treas.gov Presentation Sept.

More information

The Effect of US Unconventional Monetary Policy on Cross-Border Bank Loans: Evidence from an Emerging Market

The Effect of US Unconventional Monetary Policy on Cross-Border Bank Loans: Evidence from an Emerging Market The Effect of US Unconventional Monetary Policy on Cross-Border Bank Loans: Evidence from an Emerging Market Koray Alper Central Bank of the Republic of Turkey Fatih Altunok Central Bank of the Republic

More information

Debt Burdens and the Interest Rate Response to Fiscal Stimulus: Theory and Cross-Country Evidence.

Debt Burdens and the Interest Rate Response to Fiscal Stimulus: Theory and Cross-Country Evidence. Debt Burdens and the Interest Rate Response to Fiscal Stimulus: Theory and Cross-Country Evidence. Jorge Miranda-Pinto 1, Daniel Murphy 2, Kieran Walsh 2, Eric Young 1 1 UVA, 2 UVA Darden School of Business

More information

LEVERAGE AND LIQUIDITY DRY-UPS: A FRAMEWORK AND POLICY IMPLICATIONS. Denis Gromb LBS, LSE and CEPR. Dimitri Vayanos LSE, CEPR and NBER

LEVERAGE AND LIQUIDITY DRY-UPS: A FRAMEWORK AND POLICY IMPLICATIONS. Denis Gromb LBS, LSE and CEPR. Dimitri Vayanos LSE, CEPR and NBER LEVERAGE AND LIQUIDITY DRY-UPS: A FRAMEWORK AND POLICY IMPLICATIONS Denis Gromb LBS, LSE and CEPR Dimitri Vayanos LSE, CEPR and NBER June 2008 Gromb-Vayanos 1 INTRODUCTION Some lessons from recent crisis:

More information

An Econometric Analysis of the Volatility Risk Premium. Jianqing Fan Michael B. Imerman

An Econometric Analysis of the Volatility Risk Premium. Jianqing Fan Michael B. Imerman An Econometric Analysis of the Volatility Risk Premium Jianqing Fan jqfan@princeton.edu Michael B. Imerman mimerman@princeton.edu Wei Dai weidai@princeton.edu July 2012 JEL Classification: C01, C58, G12

More information

Does Privatized Health Insurance Benefit Patients or Producers? Evidence from Medicare Advantage

Does Privatized Health Insurance Benefit Patients or Producers? Evidence from Medicare Advantage Does Privatized Health Insurance Benefit Patients or Producers? Evidence from Medicare Advantage Marika Cabral, UT Austin and NBER Michael Geruso, UT Austin and NBER Neale Mahoney, Chicago Booth and NBER

More information

Does Uniqueness in Banking Matter?

Does Uniqueness in Banking Matter? Does Uniqueness in Banking Matter? Frank Hong Liu a, Lars Norden b, and Fabrizio Spargoli c a Adam Smith Business School, University of Glasgow, UK b Brazilian School of Public and Business Administration,

More information

Inflation Dynamics During the Financial Crisis

Inflation Dynamics During the Financial Crisis Inflation Dynamics During the Financial Crisis S. Gilchrist 1 1 Boston University and NBER MFM Summer Camp June 12, 2016 DISCLAIMER: The views expressed are solely the responsibility of the authors and

More information

Effects of working part-time and full-time on physical and mental health in old age in Europe

Effects of working part-time and full-time on physical and mental health in old age in Europe Effects of working part-time and full-time on physical and mental health in old age in Europe Tunga Kantarcı Ingo Kolodziej Tilburg University and Netspar RWI - Leibniz Institute for Economic Research

More information

Asymmetric information and the securitisation of SME loans

Asymmetric information and the securitisation of SME loans Asymmetric information and the securitisation of SME loans Ugo Albertazzi (ECB), Margherita Bottero (Bank of Italy), Leonardo Gambacorta (BIS) and Steven Ongena (U. of Zurich) 1st Annual Workshop of the

More information