Embedded Files
Trade Finance Use By Heterogeneous Firms (with Francesca de Nicola, Alexandros Ragoussis and Trang Thu Tran), CESifo Working Paper, March 2026, download.
Firm characteristics like size, productivity, age, multinational status and trading experience are key determinants of Letter of Credit use. Firm characteristics matter more for countries with weak rule of law and less information available.
Abstract
Letters of credit are a key trade finance instrument that covers more than 10 percent of global trade, with a notably larger role in low- and middle-income economies. Studying detailed trade data from Viet Nam, we document how letter of credit use varies with firm characteristics. We show that the probability of using a letter of credit is systematically lower for younger, smaller, and foreign-owned trading firms. Importers that are less diversified or have less trading experience are more likely to use letters of credit. Firm characteristics have the strongest effects in markets where information is scarce and enforcement is weak. These patterns are consistent with a model in which the ability to screen trading partners and the cost of bank intermediation vary with firm characteristics, and where a firm's screening ability and country institutions are substitutes. Any policy or intervention that aims at increasing the use of bank-intermediated trade finance will therefore need to take firm heterogeneity into account.
The Cost of Uninsured Deposits: Bargaining versus Risk (with Daniel Dias)
CESifo Working Paper, New Version March 2026, download.
First Version, August 2025.
The difference between average uninsured and insured deposit rates in the United States increased by 400 basis points over the last four decades and co-moves strongly with the Fed Funds Rate.
Abstract
Insured deposits are typically small, while uninsured deposits are often large and exposed to bank default risk. Does the uninsured deposit premium reflect default risk or the bargaining power of sophisticated depositors? We develop a methodology to estimate the gap between uninsured and insured deposit rates for U.S. banks and construct the first long-run series of this premium from 1991 to 2025. The premium
rises by nearly 400 basis points over the sample and increases by 10 to 25 basis points for every 100-basis-point increase in the federal funds rate. We show that the secular rise in the premium is largely explained by corporate deposit shares and the average size of uninsured accounts, consistent with depositor bargaining power. In contrast, we find little evidence that bank-specific risk systematically explains variation in the
premium. These changes imply a substantial reallocation of rents from small retail depositors to large corporate depositors.
The Dollar Channel of Monetary Policy Transmission (with Ralf Meisenzahl and Friederike Niepmann)
CESifo Working Paper, March 2025, download.
Dollar transmits ECB monetary policy shocks to U.S. corporate borrowing costs over and above effects from euro area interest rates and stock prices.
Abstract
This paper documents a new dollar channel that transmits monetary policy across borders. Exploiting unique features of the syndicated loan market for identification, we show that changes in the euro-dollar exchange rate around ECB monetary policy announcements that are orthogonal to simultaneous changes in euro-area interest rates and stock prices affect U.S. leveraged loan spreads. Specifically, in response to dollar appreciation, investors require higher compensation for risk, and borrowing costs for U.S. firms increase. These findings imply a causal link between the U.S. dollar and investors’ risk appetite.
This paper provides evidence on the effect of the dollar exchange rate on international trade prices, employing a new instrument for the U.S. dollar based on U.S. domestic housing activity (Ma and Zhang (2019)). In line with the dominant currency paradigm (Gopinath et al. (2020)), when instrumenting the dollar, we find evidence for a perfect pass-through of the dollar exchange rate to import prices that are invoiced in dollars.
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