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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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Housing Booms and Shirking
Quanlin Gu,Jia He,Wenlan Qian +2 more
TL;DR: In this paper, the effect of housing wealth shocks on workplace shirking behavior was studied using the type and actual time stamps of 10.6 million credit card transactions by over 200,000 cardholders from a large commercial bank to detect non-workrelated behavior during work hours.
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House Prices, Household Leverage, and Entrepreneurship
Stefano Corradin,Alexander Popov +1 more
TL;DR: In this paper, the authors present the first attempt to incorporate homeownership and house price dynamics in a model of entrepreneurial choice, showing that higher home equity increases the probability of transition into entrepreneurship, while higher household leverage has a significantly positive effect on business equity ownership.
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Can Government Demand Stimulate Private Investment? Evidence from U.S. Federal Procurement
Shafik Hebous,Tom Zimmermann +1 more
TL;DR: In this article, the effects of federal purchases on firms' investment using a novel panel dataset that combines federal procurement contracts in the United States with key financial firm-level information were studied.
Posted Content
Collateral and Local Lending: Testing the Lender-Based Theory
TL;DR: In this paper, the authors empirically test the recent lender-based theory for the use of collateral in bank lending, and they show that more distant borrowers experience higher collateral requirements and lower interest rates.
ReportDOI
Are Collateral-Constraint Models Ready for Macroprudential Policy Design?
TL;DR: The authors study the design of macro-prudential policies based on quantitative collateral-constraint models and show that the desirability of such policies critically depends on the specific form of collateral used in debt contracts.
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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.
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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.
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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.