Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects.

Disentangling the effects of a banking crisis: evidence from German firms and counties

This study uses discontinuities in US strategies employed during the Vietnam War to estimate their causal impacts It identifies the effects of bombing by exploiting rounding thresholds in an algorithm used to target air strikes Bombing increased the military and political activities of the communist insurgency, weakened local governance, and reduced non-communist civic engagement The study also exploits a spatial discontinuity across neighboring military regions, which pursued different counterinsurgency strategies A strategy emphasizing overwhelming firepower plausibly increased insurgent attacks and worsened attitudes towards the US and South Vietnamese government, relative to a hearts and minds oriented approach

Nation Building Through Foreign Intervention: Evidence from Discontinuities in Military Strategies

We are living in an increasingly globalized world yet with constant and endless conflicts among countries. While studies have uncovered the impacts of various economic factors and policy regimes on trade and investment, a much less understood issue is whether conflicts among countries have any, especially long-lasting, impacts on cross-border trade and investment. In this paper, we exploit one of the most important conflicts of the 20th century between what are currently the world's second and third largest economies, the Japanese invasion of China from 1937 to 1945, to investigate its long-run impact on contemporary trade and investment between the two countries. We find that Chinese regions that suffered more severe damage in the Japanese invasion are both less likely to trade with and trade less with Japan. Consistently, we also find that Japanese multinationals are less likely to invest in Chinese regions that suffered greater numbers of casualties during the Japanese invasion. Our study shows that historical animosity still matters for international trade and investment, despite the trend toward a flat world.

Once an enemy, forever an enemy? the long-run impact of the Japanese invasion of China from 1937 to 1945 on trade and investment

?Cuales son los efectos de una burbuja inmobiliaria sobre el resto de la economia? En este trabajo mostramos que, si las empresas y los bancos estan restringidos, una burbuja inmobiliaria inicialmente reduce el credito a empresas no relacionadas con el sector inmobiliario. Esto es asi porque el aumento inicial de la demanda de credito de empresas relacionadas con la construccion no se ve reflejado en un aumento de la oferta de credito por parte de los bancos. Sin embargo, a medida que la burbuja continua, las empresas de construccion devuelven sus prestamos y aumenta el patrimonio de los bancos y, por lo tanto, se produce una expansion en la oferta de credito a todas las empresas de la economia. De este modo, la reduccion inicial de credito en sectores no relacionados con la actividad inmobiliaria da paso a un aumento generalizado del credito (y, por tanto, de la actividad) en toda la economia inducido por la burbuja inmobiliaria. Estas predicciones son confirmadas por la evidencia empirica a lo largo del reciente boom inmobiliario de la economia espanola. En los primeros anos de la burbuja, las empresas no relacionadas con la vivienda redujeron su credito procedente de los bancos mas expuestos a la burbuja. En los ultimos anos, sin embargo, estas mismas empresas aumentaron su credito procedente de esos mismos bancos.

/pdf/the-financial-transmission-of-housing-booms-evidence-from-loqp49pezf.pdf

The Financial Transmission of Housing Booms: Evidence from Spain

The use of massive amounts of data by large technology firms (big techs) to assess firms' creditworthiness could reduce the need for collateral in solving asymmetric information problems in credit markets. Using a unique dataset of more than 2 million Chinese firms that received credit from both an important big tech firm (Ant Group) and traditional commercial banks, this paper investigates how different forms of credit correlate with local economic activity, house prices and firm characteristics. We find that big tech credit does not correlate with local business conditions and house prices when controlling for demand factors, but reacts strongly to changes in firm characteristics, such as transaction volumes and network scores used to calculate firm credit ratings. By contrast, both secured and unsecured bank credit react significantly to local house prices, which incorporate useful information on the environment in which clients operate and on their creditworthiness. This evidence implies that a greater use of big tech credit â?? granted on the basis of machine learning and big data â?? could reduce the importance of collateral in credit markets and potentially weaken the financial accelerator mechanism.

Data vs collateral

The intergenerational transmission of historical conflicts: An application to China’s trade

In geographically segmented credit markets, local real estate booms can divert capital away from manufacturing firms, create capital scarcity, increase local real interest rates, lower real wages, and cause underinvestment and relative decline in the industrial sector. Using exogenous variation in the administrative land supply across 172 Chinese cities, we show that the predicted variation in real estate prices does indeed cause substantially higher capital costs for manufactoring firms, reduce their bank lending, lower their capital intensity and labor productivity, weaken firms’ financial performance, and reduce their TFP growth by economically significant magnitudes. This evidence highlights macroeconomic stability concerns associated with real estate booms.

Capital Scarcity and Industrial Decline: Evidence from 172 Real Estate Booms in China

In geographically segmented credit markets, local real estate booms can deteriorate the funding conditions for small manufacturing firms and undermine their growth and competitiveness. Based on exogenous variations in the administrative land supply across 202 Chinese cities, we show that real estate price hikes caused by a restrictive land supply reduce bank credit to small firms, increase their borrowing costs, diminish their investment rate and compromise their output and productivity growth. Based on matched firm and product-level export data, we are able to discard local demand effects as an alternative explanations to the credit supply channel.

How Real Estate Booms Hurt Small Firms: Evidence on Investment Substitution

We study the legacy effect and transmission mechanisms of historical conflict on contemporary trade. Using new data on the regional dispersion of civilian deaths due to massacres in the Sino-Japanese war (1931-45), we find that local conflict intensity predicts international trade patterns of Chinese corporations three generations later. We further explore the transmission mechanism of collective war memory. Conflict intensity correlates with measures of anti-Japanese sentiments inferred from survey data and it appears to be transmitted both through war dramas in the mass media as well as official commemorations. We also find evidence that the trade-inhibiting effect increases with the time exposed to local war memory.

The Intergenerational Transmission of Historical Conflicts: An Application to China's Trade

In geographically segmented credit markets, local real estate booms can deteriorate the funding conditions for small manufacturing firms and undermine their competitiveness. Using exogenous variation in the administrative land supply across 172 Chinese cities, we show that higher predicted real estate prices cause higher borrowing costs for small manufacturing firms, reduce their bank lending, lower their investment rate and labor productivity, and reduce their output and TFP growth by economically significant magnitudes. These effects are absent in large and listed companies with access to the national capital market. The evidence highlights the benefits of financial market integration.

https://www.econstor.eu/bitstream/10419/214930/1/cesifo1_wp7928.pdf

Difei Ouyang

Papers

The intergenerational transmission of historical conflicts: An application to China’s trade

Capital Scarcity and Industrial Decline: Evidence from 172 Real Estate Booms in China

How Real Estate Booms Hurt Small Firms: Evidence on Investment Substitution

The Intergenerational Transmission of Historical Conflicts: An Application to China's Trade

Local Capital Scarcity and Small Firm Growth: Evidence from Real Estate Booms in China