Abstract: 

Using a unique confidential dataset with industry-level dis-aggregation of official U.S. securities claims and liabilities, we uncover the following facts. Dollar-denominated securities are largely intermediated through tax havens-financial centers (THFC) and by less-regulated funds. These securities are risky and respond to tax rates and prudential regulations, suggesting tax avoidance motives and regulatory arbitrage. Issuers are mostly multi-nationals, investing in intangible assets, hence easily movable across bor- ders, but with high uncertain collateral values. Investors require high Sharpe ratio, a clear indication of search-for yield. In contrast, safe Treasuries are mainly held by the foreign official sector and increased at the time of the quantitative easing policies. We rationalize these facts with a model in which multi-nationals, heterogeneous in the default probabilities, enter THFC to shift profits and access funding through off- shore intermediaries. An increase in global savings, by reducing debt costs, raises firms’ profits. This in turn reduces funds’ monitoring incentives. Debt spreads appear elusively low as the ex-post default probability is now higher.

Abstract: 

We show, theoretically and empirically, that the effects of technological change associated with automation and offshoring on the labor market can substantially deviate from standard neoclassical conclusions when search frictions hinder efficient matching between firms with heterogenous tasks and workers with heterogenous skills. Our key hypothesis is that better matches enjoy a comparative advantage in exploiting new technologies. It implies that technological change promotes employment when initial productivity is low so that firms and workers are not very selective in matching, whereas it hampers employment when initial productivity is high enough to make firms and workers sufficiently selective. Capturing task heterogeneity at the sectoral level and skill heterogeneity at the occupational level, we find empirical support to the model’s predictions in a dataset covering 92 occupations and 16 sectors in 13 countries from 1995 to 2010. 

Abstract:

This paper presents causal evidence of the effects of boardroom networks on firm value and compensation policies. We exploit exogenous variation in network centrality arising from a ban on interlocking directorates of Italian financial and insurance companies. We leverage this shock to show that firms whose centrality in the network rises after the reform experience positive abnormal returns around the announcement date and are better hedged against shocks. Information dissemination plays a central role: results are driven by firms that have higher idiosyncratic volatility, low analyst coverage, and more uncertainty surrounding their earnings forecasts. Firms benefit more from boardroom centrality when they are more central in the input-output network, hence more susceptible to upstream shocks, when they are less central in the cross-ownership network, or when they have low profitability or low growth opportunities. Network centrality also results in higher directors’ compensation, due to rent sharing and improved executives’ outside option, and more similar compensation policies between connected firms.

Abstract:

Using a unique confidential labor contract level dataset merged with firm-level asset price data, we find robust evidence that firms’ stock market valuations and employment levels (at the intensive and extensive margin) respond more to monetary policy announcements the higher the degree of wage rigidity. Data on the renegotiations of collective bargaining agreements allow us to construct an exogenous and accurate measure of wage rigidity. The amplification induced by wage rigidity is stronger for firms with high labor intensity, low profitability, and that employ mostly workers with full-time contracts. Hence, there are clear distributional consequences of monetary policy. We rationalize and quantify the evidence through the lenses of a dynamic general equilibrium model in which firms in different sectors feature different degrees of wage rigidity due to staggered renegotiations vis-a-vis unions. 

Abstract:

When banks expand abroad, their riskiness decreases if foreign expansion happens in destination countries that are more competitive than their origin countries.We reach this conclusion in three steps. First, we develop a flexible dynamic modelof global banking with endogenous competition and endogenous risk-taking. Second, we calibrate and simulate the model to generate empirically relevant predictions. Third, we validate these predictions by testing them on an original datasetcovering the activities of the15European global systemically important banks (G-SIBs). Our results hold across alternative measures of individual and systemic bank risk.

Abstract:

Financial crises are anticipated by leverage build-up and asset price booms and followed by sharp de-leveraging and asset price burst. Leverage pro-cyclicality, debt margins counter-cyclicality and heightened asset price volatility are often hard to reconcile with credit frictions models, with and without occasionally binding constraints. We show that a model in which the anticipatory effects of occasionally binding collateral constraints interact with borrowers’ time-varying risk-attitudes (modeled through gain-loss reference dependent utilities) and with borrowers/lenders risk-attitudes heterogeneity can explain those facts. Simulations through global methods show that the model can also match numerous asset price and leverage statistics. 

Abstract:

This paper studies the optimal design of equity and liquidity regulations in a dynamic macro model with information-based bank runs. Although the latter are privately efficient, since they discipline bank managers efforts into the projects’ re-deploying activity, they induce aggregate externalities. Technological inefficiencies arise if bank managers extract rents which are higher than the technological costs of re-deploying projects. Pecuniary externalities arise since, when choosing leverage, bank managers do not internalize the fall in asset price ensuing from the aggregate costs of projects’ liquidation in a run event. This creates scope for regulation. Equity and liquidity requirements are complementary, as the first tackles the solvency region, while the second the illiquid-solvent one. Finally, in presence of anticipatory effects prudential policies may have unintended consequences as banks adjust their behaviour when a shift in prudential regime is announced. The more so the higher the credibility of the announcement. 

Abstract: 

Financial crises originate in debt markets, where beliefs formation about asset values affects collateral constraints tightness and leverage cycles. We introduce novel state-contingent ambiguity attitudes, which endogenously induce pessimism in recessions and optimism in booms, in a model with occasionally binding col- lateral constraints. GMM estimation is used to calibrate the ambiguity process. Analytically and numerically (global methods) it is shown that the model explains asset price and debt cycle facts. Optimism explains the build-up of leverage and asset prices prior to a crisis event, pessimism heightens the de-leveraging following it.

Using PISA data for all waves and countries, it is shown that family cultural and economic background has bigger influence than school characteristics and quality on adolescents’ math, reading and science scores. Women education, a proxy for women empowerment, has an added and increasing effect, when controlling for assortative mating. Their added value peaks at intermediate levels of education, but declines afterwards, when controlling for educational homogamy. A model with households’ collective bargaining, warm glow preferences and human capital accumulation can rationalize the evidence. Analytically and numerically it is shown that mothers’ higher impact is due either to higher devotion to child-rearing or to a within-household bargaining that raises in education, or else the empowerment externality.