Claire Labonne
Boston Fed

I am a financial economist at the Boston Fed, in the Risk and Policy Analysis group of the Supervision, Regulation and Credit department. 

Research interests:
Financial Economics, Real Estate, Applied Microeconometrics, Credit  


Easy access to credit markets catalyses homeownership. But restricting credit to the safest households ensures financial stability. This trade-off bears sizeable consequences. In France, housing is indeed half of households’ wealth and more than 20% of their consumption. To analyse this trade-off, we collect loan-level data covering about 25% of the French housing credit market and gathering loans’ and borrowers’ characteristics at origination as well as the housing location.  Our first result is to document that housing borrowers’ income was 3% higher than average disposable income in 2001 but is 25% higher in the 2010s.

To be able to analyse the effect of credit conditions on access to homeownership, we need to handle the endogeneity between credit and prices. We use the French Interest-Free Loan (IFL) policy limitations. The policy offers interest-free loans to first-time buyers. Borrowers are eligible throughout the country. But the subsidy varies along administratively defined housing policy areas. Where real estate is the most expensive, the subsidy is bigger. This makes the subsidy conditional on housing market conditions. But we can handle the difficulty thanks to zoning inconsistencies. We sample only municipalities bordering zones limits. They are not significantly different housing markets even though they receive different subsidies. These inconsistencies are the results of poor information systems as well as interferences with political objectives. IFL policy is arguably exogenous to contemporaneous and expected housing prices in the sample of bordering municipalities. One could worry mayors of municipalities with a high demand for homeownership might lobby for the reclassification of their cities into high subsidies housing policy areas. Local demand pressures would be conveyed through zoning redefinitions. But the zoning redefinitions are not simultaneous with the IFL size reforms we use as credit supply shocks.

Our main contribution is to show softer credit conditions allow lower income borrowers on the market. We find the IFL policy relaxes credit conditions. Bigger IFL subsidies are associated with higher loan-to-value ratios, credit volumes and number of loans.  IFL subsidies also change borrowers’ characteristics. We approximate credit market selection by the difference between borrowers’ and average household income in each ZIP-code. Higher IFL subsidies reduce credit market selection - make borrowers’ income closer to the average income. Evidence points to this being the consequence of the relaxed credit conditions. Higher IFL subsidies increase house prices as well. This is channelled by the higher credit volumes. We find a high elasticity of housing prices to housing credit when we instrument the latter variable by the IFL (close to 0.7). But this effect is only temporary and fades out after one semester. 

Bad Sovereign or Bad Balance Sheets? Euro Interbank Market Fragmentation and Monetary Policy, 2011-2015with S. Gabrieli (Banque de France)  

We measure the relative role of sovereign-dependence risk and balance sheet (credit) risk in euro area interbank market fragmentation from 2011 to 2015. We combine bank-to-bank loan data with detailed supervisory information on banks’ cross-border and cross-sector exposures. We study the impact of the credit risk on banks’ balance sheets on their access to, and the pricey paid for, interbank liquidity, controlling for sovereign-dependence risk and lenders’ liquidity shocks. We find that (i) high non-performing loan ratios on the GIIPS portfolio hinder banks’ access to the interbank market throughout the sample period; (ii) large sovereign bond holdings are priced in interbank rates from mid-2011 until the announcement of the OMT; (iii) the OMT was successful in closing this channel of cross-border shock transmission; it reduced sovereign-dependence and balance sheet fragmentation alike.

Credit Growth and Bank Capital Requirements: Identification using Supervisory Ratings, with G. Lamé (French Treasury)

We identify the effects of capital requirements on banks’ behaviour, either their credit supply or profit and loss account. We have collected data on Pillar 2 capital requirements and banks rating of the French supervisor. The overall rating of a bank can be decomposed into various ratings. Some of these ratings are exogenous to the macroeconomic environment or credit demand. The paper aims at using ratings which can be considered as exogenous to the macroeconomic environment and the credit demand (rating for intern audit quality for example) as instruments for capital requirements.

Work in progress

Less Foreclosures, More Homeowners? Spillovers from Non-Performing Loans to Originations during the Irish Mortgage Default Crisis, with Fergal McCann (Central Bank of Ireland)

Mortgage Modifications during the Irish Mortgage Default Crisis, with Fergal McCann and Terry O’Malley (Central Bank of Ireland)

Choosing Optimal Stress Scenarios, with Lina Lu and Matthew Pritsker (Boston Fed)

Bank Capital and Liquidity Regulations, with Michal Kowalik (Boston Fed)