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The Collateral Channel: How Real Estate Shocks Affect Corporate Investment
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In this article, the impact of real estate prices on corporate investment was studied and the sensitivity of investment to real estate values was found to be a function of local variations in real estate price as shocks to the collateral value of firms that own real estate.Abstract:
What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. To compute the sensitivity of investment to collateral value, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. Over the 1993-2007 period, the representative US corporation invests $0.06 out of each $1 of collateral.read more
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Collateral Damage: Housing, Entrepreneurship, and Job Creation *
TL;DR: In this article, a heterogeneous agent DSGE model with both housing and entrepreneurship is presented, characterized by nancial frictions that aect from a historic decline in home values that preceded the onset of the broad recession by at least nine months.
MonographDOI
Effects of land misallocation on capital allocations in India
TL;DR: In this paper, the authors used plant-level data on the organized and unorganized sectors to describe the temporal, geographic, and industry distributions of financial loans, and found that land misallocation might be an important determinant of financial misallocations (for example, because of the role of land as collateral against loans).
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The other (commercial) real estate boom and bust: the effects of risk premia and regulatory capital arbitrage
TL;DR: In this article, the role of commercial real estate (CRE) prices in the Great Recession has received little attention, and the authors estimate cohesive models of short-run and long-run movements in capitalization rates (rent-to-price ratio) and risk premiums across the four major types of commercial properties.
The Balance Sheet Channel of Monetary Policy Transmission: Evidence From Nigeria
TL;DR: Olorunsola E. Olowofeso, Abiodun S. Bada, Kufre J. Bassey and Kumafan S. Dzaan as mentioned in this paper assessed the existence of a balance sheet channel of monetary policy transmission in Nigeria by examining whether variation in the official interest rate, with respect to the 20072008 global financial crisis, feeds through to the DMBs balance sheets, and ultimately reflects in output and prices.
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The residential collateral channel
TL;DR: In this paper, the authors present evidence on a new macroeconomic channel which they call the residential collateral channel, which is a key determinant of investment and job creation, with a £1 increase in the combined residential collateral of a firm's directors estimated to increase the firm's investment by £ 0.02 and total wage costs by £0.02.
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Credit Rationing in Markets with Imperfect Information.
Joseph E. Stiglitz,Andrew Weiss +1 more
TL;DR: In this paper, a model is developed to provide the first theoretical justification for true credit rationing in a loan market, where the amount of the loan and amount of collateral demanded affect the behavior and distribution of borrowers, and interest rates serve as screening devices for evaluating risk.
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How Much Should We Trust Differences-In-Differences Estimates?
TL;DR: In this article, the authors randomly generate placebo laws in state-level data on female wages from the Current Population Survey and use OLS to compute the DD estimate of its "effect" as well as the standard error of this estimate.
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Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?
Steven N. Kaplan,Luigi Zingales +1 more
TL;DR: In this article, the authors investigated the relationship between financing constraints and investment-cash flow sensitivities by analyzing the firms identified by Fazzari, Hubbard, and Petersen as having unusually high investment cash flow sensitivity.
Posted Content
Agency Costs, Net Worth, And Business Fluctuations
Ben S. Bernanke,Mark Gertler +1 more
TL;DR: The authors constructs a simple neoclassical model of intrinsic business cycle dynamics in which borrowers' balance sheet positions play an important role and shows that the agency costs of undertaking physical investments are inversely related to the entrepreneur's/borrower's net worth.
Journal ArticleDOI
Tobin's Marginal q and Average q : A Neoclassical Interpretation
TL;DR: In this paper, the optimal rate of investment as a function of marginal q adjusted for tax parameters is derived from data on average q assuming the actual U.S. tax system concerning corporate tax rate and depreciation allowances.