Research

 Work in Progress

Micro- and Macroeconomic Impacts of a Place-Based Industrial Policy (with Enghin Atalay, Ali Hortaçsu, Chad Syverson, and Mustafa Runyun)

Labor Mobility and R&D Spillovers (with M. Nurullah Güleç and Song Ma)

Working Papers and Publications

Imported Intermediate Goods and Product Innovation: Evidence from India  (Journal of International Economics) 

We build a structural model of multi-product firms to illustrate how access to foreign intermediate goods contributes to product innovation. We establish a stochastic dynamic model of firm evolution and allow firms to be heterogeneous in their efficiency levels. The model’s mechanism to capture the effects of importing intermediate goods is twofold: (i) importing these goods increases the revenue per each product introduced, and (ii) increases the likelihood of introducing new varieties using newly available inputs. We calibrate the model to firm-level data from India. The model successfully explains the heterogeneous innovation dynamics and statistical moments related to importing and product distribution. Counterfactual exercises further illustrate and quantify the mechanism between trade, innovation performance, and product growth. We find that the critical contribution of trade to growth and product innovation is mainly through access to new imported varieties rather than just the direct import cost. 

International Spillovers and Local Credit Cycles  (The Review of Economic Studies) 

This article studies the transmission of the Global Financial Cycle (GFC) to domestic credit market conditions in a large emerging market, Turkey, over 2003–13. We use administrative data covering the universe of corporate credit transactions matched to bank balance sheets to document four facts: (1) an easing in global financial conditions leads to lower borrowing costs and an increase in local lending; (2) domestic banks more exposed to international capital markets transmit the GFC locally; (3) the fall in local currency borrowing costs is larger than foreign currency borrowing costs due to the co-movement of the uncovered interest rate parity (UIP) premium with the GFC over time; (4) data on posted collateral for new loan issuances show that collateral constraints do not relax during the boom phase of the GFC. 

Do Physiological and Spiritual Factors Affect Economic Decisions?   (The Journal of Finance)

We examine the effects of physiology and spiritual sentiment on economic decision-making in the context of Ramadan, an entire lunar month of daily fasting and increased spiritual reflection in the Muslim faith. Using an administrative data set of bank loans originated in Turkey during 2003 to 2013, we find that small business loans originated during Ramadan are 15% more likely to default within two years of origination. Loans originated in hot Ramadans, when adverse physiological effects of fasting are greatest, and those approved by the busiest bank branches perform worse. Despite their worse performance, Ramadan loans have lower credit spreads. 

Capital Flows and the International Credit Channel  (Journal of International Economics) 

We examine the role of the international credit channel in Turkey over 2005–2013. We show that larger, more capitalized banks with higher non-core liabilities increase credit supply when capital inflows are higher. This result is stronger for domestic banks relative to foreign banks and survives during the crisis period of post-2008 when foreign banks in general stop lending in emerging markets and retreat to their home countries. By decomposing capital inflows into bank and non-bank flows, we show the importance of domestic banks’ external borrowing for domestic credit growth.

Effects of Licensing Reform on Firm Innovation: Evidence from India  (The Review of Industrial Organization) 

The regulatory environment in a country is an important factor affecting firm performance. This study investigates the impact of a particular regulation, namely license requirements for certain firm activities, on the innovation performance of Indian firms. Using a unique firm-level panel data set, it shows that the removal of license requirements led to eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries that they were not producing before. The conclusions found in this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of delicensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods.

Heterogeneity and Uncertainty in the Dynamics of Firm Selection into Foreign Markets

Firm-level data indicates a positive relationship between a firm’s revenues from a market and the number of markets penetrated by that firm, and previous presence in that market. I study a partial equilibrium analysis to explain an entry-cost-reducing effect of previous presence in a market, and increasing returns to being in more markets. I find that being in an additional market increases the demand in other markets between 1% and 3% across different sectors. Additionally, a variance decomposition between firm and market-specific heterogeneity and idiosyncratic uncertainty in firms’ selection problem indicates that 1) firm-specific heterogeneity explains more of the total residual variation in revenues from foreign markets as opposed to idiosyncratic variation in technology-intensive industries than less technology intensive ones and 2) the relative importance of idiosyncratic components diminishes as the level of per capita income of a destination market increases.

Firm Size, Imported Intermediate Inputs, and Value-Added Content of Production

This paper analyzes the interaction between size, imported intermediate inputs, and exports behavior of heterogeneous firms. Data from Turkish manufacturing firms exhibit some patterns about these interactions which are: 1) the share of imports in total intermediate inputs is, on average, higher for the exporter firms than the non- exporter ones at all size percentiles, 2) the share of imports in total intermediate inputs grows faster with size for the exporters than for the non-exporters, 3) as the number of imported intermediate input varieties goes up, the number of firms importing that many varieties goes down. This paper explains these regularities in a setup where firms decide about importing and exporting simultaneously while adapting each intermediate good into the production process is costly.