Banking Crises and Investments in Innovation

Files in This Item:
File Description SizeFormat 
WP17_27.pdf846.78 kBAdobe PDFDownload
Title: Banking Crises and Investments in Innovation
Authors: Peia, Oana
Permanent link: http://hdl.handle.net/10197/9101
Date: Dec-2017
Abstract: This paper proposes a new channel to explain the medium- to long-term effects of banking crises on the real economy. It embeds a banking sector prone to runs in a stylized growth model to show that episodes of bank distress affect not only the volume, but also the composition of firm investment, by disproportionally decreasing investments in innovation. Thishypothesis is confirmed empirically employing industry-level data on R&D spending around 13 recent banking crises episodes. Using difference-in-difference identification strategies, I show that industries that depend more on external finance, in more bank-based economies, invest disproportionally less in R&D following systemic banking crises. These industries also have a lower share of R&D spending in total investment, suggesting a shift in the composition of investment that is specific to recessions following banking crises and not other business cycle recessions.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Copyright (published version): 2017 the Author
Keywords: Banking crisesR&D investmentFinancial dependenceGlobal games
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

Show full item record

Google ScholarTM

Check


This item is available under the Attribution-NonCommercial-NoDerivs 3.0 Ireland. No item may be reproduced for commercial purposes. For other possible restrictions on use please refer to the publisher's URL where this is made available, or to notes contained in the item itself. Other terms may apply.