Work in progress

"Corporate Reorganization and the Reallocation of Labor in Bankruptcy" (with Gil Nogueira)

We analyze how corporate reorganization and liquidation change labor reallocation during bankruptcy using randomized judge assignments and linked Portuguese employer-employee and firm data. Reorganization reduces the negative effect of bankruptcy on employee earnings, even with most workers leaving reorganized firms. We examine plausible mechanisms and find evidence that the retention of general skills and improved job-match quality contribute meaningfully to this effect. The average cost of labor misallocation caused by reorganization is small. However, for some workers in the least productive filers, this cost can be large, outweighing the effect on earnings.

Summary in the Harvard Law School Bankruptcy Roundtable and in the Oxford Business Law Blog.

"The Augmented Bank Balance-Sheet Channel of Monetary Policy" (with Christian Bittner, Florian Heider, Farzad Saidi,  Glenn Schepens, and Carla Soares)

This paper studies how banks' balance sheets and funding costs interact in the transmission of monetary-policy rates to banks' credit supply to firms. To do so, we use credit-registry data from Germany and Portugal together with the European Central Bank's policy-rate cuts in mid-2014. The pass-through of the rate cuts to banks' funding costs differs across the euro-area currency union because deposit rates vary in their distance to the zero lower bound (ZLB). When the distance is shorter, banks' financing constraints matter less for the supply of credit and there is more risk taking. To rationalize these findings, we provide a simple model of an augmented bank balance-sheet channel where in addition to costly external financing, there is screening of borrowers and a ZLB on retail deposit rates. An impaired pass-through of monetary policy to banks' funding costs reduces their ability to lever up and weakens their lending standards.

EFA 2020 presentation: here.

"Bank Specialization in Lending to New Firms" (with Alexandra Matyunina, Ralph De Haas, and Steven Ongena )

We formulate a novel dimension of bank-lending specialization---specialization in lending to new firms---and investigate its impact on the creation, credit access, and survival of new businesses. We exploit a Portuguese reform that drastically reduced the red tape of starting a new firm and that was rolled out in a staggered manner across municipalities from mid-2005 onward. We show that while reducing regulatory barriers stimulates business creation, this effect depends crucially on the pre-reform number and market share of local banks specialized in lending to new firms. A greater presence of such specialized bank branches is associated with improved credit access and higher leverage of new local businesses. Moreover, new firms that obtain loans from specialized branches exhibit an up to 12 percent higher survival rate.

"Decomposing Employment Effects of a Government Support Program: Hires, Exits and Reallocation" (with Cláudia Custódio,  Matthijs Oosterveen, and Clara Raposo)

We decompose the employment effects of a credit guarantee scheme to small firms during a crisis and a recovery period. We explore firm-level variation in access to the program to show that net employment increases, but only during crises. Using matched employer-employee data, we are able to decompose this effect into hires and exits. We find that firms eligible for the program hire more, but also have more exits. Hired workers come mostly from unemployment and exiting workers do not immediately find a new job, showing that there is no direct reallocation of workers across firms. Newly hired and exiting workers do not differ on most observable characteristics, suggesting that immediate adjustments are more related to quantity rather than quality. Government support to small firms during crises does not seem to lead to job retention of "zombie" workers.

"Resilience Amid Panic: A Story of Bank Runs Without Failures in a Pre-Central Bank Era" (with Gonçalo Almeida and Ricardo Duque Gabriel)

The 1876 Portuguese banking crisis, triggered by a partial default on Spanish bonds, offers a compelling historical case of widespread bank runs in a pre-central bank setting, where no major bank failures occurred despite severe liquidity pressures. Using unique hand-collected data and narrative evidence, paired with a difference-in-differences framework, we analyze the liquidity-driven nature of the runs and document significant declines in deposits and subsequent reductions in credit provision for banks exposed to Spanish sovereign debt. Preemptive and sizeable government interventions --- liquidity provision, currency suspension, and payment moratoria --- successfully averted systemic collapse. However, regions more affected by the runs experienced lasting economic scarring, highlighting the uneven consequences of financial crises.

"House on Fire: Climate Risk, Mortgages, and Monetary Policy" (with Sujiao (Emma) Zhao)

We study whether exposure to climate risk affects banks' mortgage-lending decisions. Using detailed wildfire hazard and occurrence data in Portugal, we find evidence that banks charge higher risk premiums for mortgages originating in at-risk but not directly affected areas. This result is established by exploiting the variation in mortgage pricing within very granular bins of mortgages and debtors with similar characteristics, which are differentially exposed to wildfire risk. We investigate whether monetary policy affects the pricing of climate risk. We find that when monetary policy tightens, the climate risk premium increases. 

"Monetary policy at the margin" (with Miguel García-Posada, Sergio Mayordomo and Maria Rodríguez Moreno)

Zero-bank-debt firms  (ZBD firms) face, due to their lack of credit history, more difficult access to bank loans than firms with previous bank debt (non-ZBD firms). While overall monetary policy does not affect the likelihood that a ZBD firm obtains credit for the first time, expansionary monetary policy eases the credit constraints faced by those firms, especially when they are young. As increased access to credit by ZBD firms does not lead to a higher probability of having non-performing loans but has greater effects on employment growth and investment than those experienced by non-ZBD firms, this channel could be beneficial for the whole economy without entailing financial stability risks.  

"Household Borrowing and Monetary Policy Transmission: Post-Pandemic Insights from Nine European Credit Registers" (with Olivier De Jonghe et al.)

We investigate the heterogeneity in household credit markets across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal and Slovakia) during the period 2022-2024. To this end, we exploit a unique dataset comprising granular data from these countries' credit registers. First, we document stylized facts about the dynamics in household credit markets, documenting a large degree of both between- and within-country heterogeneity. We center the stylized facts around various types of household credit and further differentiate them according to borrower age, loan maturity, and interest rate fixation. Second, we analyze how the pass-through of monetary policy has a heterogeneous impact on household credit markets and segments that would be overlooked by looking at aggregate data. Pass-through is stronger in mortgages than in consumer loans. Transmission is stronger for younger borrowers in mortgages and for older ones in consumer loans. Overall, pass-through is stronger for longer maturities and shorter interest rate fixation periods. There are differences in pass-through across countries that cannot be explained by borrower and loan characteristics.