Research
Research
Working Papers
Financial Deregulation and Fertility Decisions. The Unintended Consequences of Financial Legislation (with Lukas Diebold)
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Abstract: Financial deregulation has important implications beyond the realm of finance, and these effects differ by race. In this paper we use staggered difference-in-differences to link state level banking deregulation during the 1980s in the United States to two demographic outcomes: mothers' age at first childbirth and fertility rates. We find that after deregulation the average age at which women become mothers for the first time increases, and that this effect is stronger for the non-white population. The average effect on total fertility is positive over short horizons, but reverts back to zero over longer horizons. For the non-white sample, however, this reversion outweighs the previous increase, resulting in a net fertility decrease. We argue that the main channel for these effects is the boom in house prices induced by deregulation. On the one hand, this boom delays fertility by prolonging the period of saving before a home purchase, on the other, it reflects a wealth gain for home owning families, linked to increased fertility. Given the stark discrepancy in financial constraints and home ownership rates between the white and non-white population in the US, the relative strength of the channels differs, resulting in significant heterogeneity in outcomes.
Sectoral MacroPrudential Policy and the Sectoral Allocation of Bank Credit
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Abstract: Anovel dataset for 72 countries has been constructed, containing bank credit disaggregated by borrowing sector. I show that household-targeted macroprudential policy not only reduces credit to households but also, via spillover effects, increases credit to firms. By virtue of these effects, the share of corporate credit in banks’ loan portfolios increases. The results are mainly driven by borrower-based household-targeted macroprudential policy tools, as opposed to lender-based tools. In order to assess if the new sectoral allocation of bank credit following household-targeted macroprudential policy is beneficial for the economy, I study the nonperforming loans to total loans ratio and the unemployment rate. While the evidence on lender-based tools is mixed, household-targeted borrower-based macroprudential tools are associated with reductions in the nonperforming loans ratio in the sample of advanced economies and with reductions in the unemployment rate in the sample of emerging and developing economies.
MacroPrudential Policy, Balance Sheet Reactions, Interest Rates and Inflation. Evidence from the Euro Area
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Abstract: This paper evaluates how banks react to Macroprudential Policy (MaPP) by assessing the impact on bank credit, banks’ government bond holdings, and on the pricing of new loans and deposits. It also assesses the Consumer Price Index (CPI) footprint of MaPP. The analysis is based on a monthly panel of Euro Area countries from 2000 to 2017. My results indicate that MaPP has a stronger dampening effect on credit than on the CPI, as expected. Nevertheless, MaPP has a downard pressure on the price level, Monetary Policy’s target. It is also found that banks’ reaction to MaPP via credit quantities is stronger than their reaction via credit prices. This is good news for the Interest Rate Channel of Monetary Policy, as this channel works through interest rates. Total credit experiences a reduction following MaPP, but the effect is not symmetrical across credit segments. Household loans for consumption and loans to nonfinancial corporations exhibit the strongest fall in credit growth following MaPP. While capital-based tools are associated with short-term credit reductions, liquidity-based tools are found to exhert the strongest negative effect on credit. Capital- and liquidity-based MaPP tools are also found to increase banks’ government bond holdings. With respect to interest rates, my results indicate that borrower-based MaPP tools are associated with reductions on mortgage interest rates. Capital-based tools are found to decrease the interest rates on deposits. My results imply that Monetary Policy and Macroprudential Policy coordination is justified.