Now showing 1 - 5 of 5
- PublicationEnforcement of banking regulation and the cost of borrowingWe show that borrowing firms benefit substantially from important enforcement actions issued on U.S. banks for safety and soundness reasons. Using hand-collected data on such actions from the main three U.S. regulators and syndicated loan deals over the years 1997–2014, we find that enforcement actions decrease the total cost of borrowing by approximately 22 basis points (or $4.6 million interest for the average loan). We attribute our finding to a competition-reputation effect that works over and above the lower risk of punished banks post-enforcement and survives in a number of sensitivity tests. We also find that this effect persists for approximately four years post-enforcement.
213Scopus© Citations 13
- PublicationQuantitative easing and household wealth inequality across the euro areaWe examine how the unconventional monetary policies implemented by the ECB, namely negative deposit facility rate (NDFR) and quantitative easing (QE), affect asset portfolios and wealth distributions across European households. Using micro survey data from the Household Finance and Consumption Survey (HFCS), first we estimate wealth distributions across Euro Area countries. Second, we simulate how shocks in the price of assets, due to policy announcement and implementation, affect household’s capital gains depending on their level of wealth. We find that housing represents the largest share of households’ assets across all Euro Area countries and that wealth inequality increases from 2010 to 2014. Overall, unconventional monetary policies have a positive effect on households’ capital gains across all groups of the wealth distribution. However, households at the bottom end of the distribution benefit mostly from the NDFR, whereas households at the top end benefit mostly from QE policies.
- PublicationEducation and Credit: A Matthew EffectUsing a unique corporate loans dataset for entrepreneurs with small and microenterprises, this paper examines how educational attainment affects bank credit decisions and subsequent individual and firm outcomes. Our results highlight a “Matthew Effect,” where an initial advantage is self-amplifying. We find that entrepreneurs who obtain university education are more likely to apply for credit, and receive higher credit scores, and better lending terms. Via this credit channel, such entrepreneurs have significantly better future firm outcomes compared to those without a university education. Furthermore, we find a key role for investments in innovation, intangible assets, and lower within-firm pay inequality.
- PublicationCorporate tax changes and credit costsWe examine changes in the corporate tax rate across the U.S. and their implications on the pricing and quantity of loans. We find an asymmetric effect on the cost of credit: loan spreads decrease by approximately 5.9 basis points in response to a one percentage tax cut, but they are insensitive to corporate tax increases. Primarily, a debt restructuring effect (working via firm’s leverage) and, secondarily, a credit supply effect (working via bank market power and bank capital) drive the easing effect of tax cuts on equilibrium loan pricing, while the effect on the equilibrium quantity of loans is insignificant.
- PublicationInvestment Tax Incentives and Their Big Time-to-Build Fiscal MultiplierThis paper studies how investment tax incentives stimulate output in a medium-scale DSGE model, which allows for a variety of fiscal funding mechanisms. We find that the horizon following a positive shock in investment tax incentives is crucial. The shock is highly expansionary in the long run with the relevant fiscal multiplier substantially exceeding 1, but this effect only becomes visible after two to three years. Our analysis indicates that a rise in the marginal product of labor and the demand for labor trigger this expansion, which is an effect that partial equilibrium studies ignore. Our analysis also contributes to the time-to-build profile of the fiscal multiplier. The results suggest that investment tax incentives are even more effective when nominal wages adjust faster.