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"2000-2012"
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REGIONAL HETEROGENEITY AND THE REFINANCING CHANNEL OF MONETARY POLICY
We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts, but these effects vary over time with changes in the regional distribution of house price growth. We build a heterogeneous household model of refinancing with mortgage borrowers and lenders and use it to explore the monetary policy implications arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policy makers should track the regional distribution of equity over time.
Journal Article
Hack attack : the inside story of how the truth caught up with Rupert Murdoch
\"At first, it seemed like a small story. The royal editor of the News of the World was caught listening to the voicemail messages of staff at Buckingham Palace. He and a private investigator were jailed, and the case was closed. But Nick Davies, special correspondent for The Guardian, knew that it didn't add up. He began to investigate, and ended up exposing a world of crime and cover-up, of fear and favor -- the long shadow of Rupert Murdoch's media empire. How Davies and a small group of lawyers and politicians took on one of the most powerful men in the world -- and beat him. It exposes the inner workings of the ruthless machine that was the News of the World, and of the private investigators who hacked phones, listened to live calls, sent Trojan horse emails, bribed the police, and committed burglaries to dig up tabloid scoops. Above all, it is a study of the private lives of the power elite. The social network that gave Murdoch privileged access to government, and allowed him and his lieutenants to intimidate anyone who stood up to them. Covering events from February 2008 to July 2011, this is the definitive record of one of the major scandals of our time, written by the journalist who was there every step of the way\"--Provided by publisher.
Book
Disentangling the Effects of a Banking Crisis
Lending cuts by banks directly affect the firms borrowing from them, but also indirectly depress economic activity in the regions in which they operate. This paper moves beyond firm-level studies by estimating the effects of an exogenous lending cut by a large German bank on firms and counties. I construct an instrument for regional exposure to the lending cut based on a historic, postwar breakup of the bank. I present evidence that the lending cut affected firms independently of their banking relationships, through lower aggregate demand and agglomeration spillovers in counties exposed to the lending cut. Output and employment remained persistently low even after bank lending had normalized. Innovation and productivity fell, consistent with the persistent effects.
Journal Article
Political Booms, Financial Crises
Political booms, measured by the rise in governments’ popularity, predict financial crises above and beyond better known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We argue that governments in developing countries have stronger incentives to “ride” unsound credit booms in order to boost their popularity, rather than implementing corrective policies that could prevent crises but are politically costly. We provide evidence of the relevance of this mechanism, partly by constructing a new cross-country data set on government popularity based on opinion polls.
Journal Article
Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone
We provide a comprehensive account of the dynamics of eurozone countries from 2000 to 2012. We analyze private leverage, fiscal policy, labor costs, and spreads, and we propose a model and an identification strategy to separate the impact of credit cycles, excessive government spending, and sudden stops. We then ask how periphery countries would have fared with different policies. We find that countries could have stabilized their employment if they had followed more conservative fiscal policies during the boom. Macroprudential policies and an early intervention by the central bank to prevent market segmentation and reduce fiscal austerity would also have significantly reduced the recession.
Journal Article
Wall Street and the Housing Bubble
We analyze whether midlevel managers in securitized finance were aware of a large-scale housing bubble and a looming crisis in 2004–2006 using their personal home transaction data. We find that the average person in our sample neither timed the market nor were cautious in their home transactions, and did not exhibit awareness of problems in overall housing markets. Certain groups of securitization agents were particularly aggressive in increasing their exposure to housing during this period, suggesting the need to expand the incentives-based view of the crisis to incorporate a role for beliefs.
Journal Article
Lack of Selection and Limits to Delegation
Delegating managerial tasks is essential for firm growth. Most firms in developing countries, however, do not hire outside managers but instead rely on family members. In this paper, we ask if this lack of managerial delegation can explain why firms in poor countries are small and whether it has important aggregate consequences. We construct a model of firm growth where entrepreneurs have a fixed time endowment to run their daily operations. As firms grow large, the need to hire outside managers increases. Firms’ willingness to expand therefore depends on the ease with which delegation can take place. We calibrate the model to plant-level data from the United States and India. We identify the key parameters of our theory by targeting the experimental evidence on the effect of managerial practices on firm performance from Bloom et al. (2013). We find that inefficiencies in the delegation environment account for 11 percent of the income per capita difference between the United States and India. They also contribute to the small size of Indian producers, but would cause substantially more harm for US firms. The reason is that US firms are larger on average and managerial delegation is especially valuable for large firms, thus making delegation efficiency and other factors affecting firm growth complements.
Journal Article
The returns to college persistence for marginal students
We estimate the returns to college using administrative data on both college enrollment and earnings. Exploiting that colleges dismiss low-performing students on the basis of exact GPA cutoffs, we use a regression discontinuity design to estimate the earnings impacts of college. Dismissal leads to a short-run increase in earnings and tuition savings, but the future fall in earnings is sufficiently large that 8 years after dismissal, persisting students have already recouped their upfront investment with an internal rate of return of 4.1%. We provide a variety of evidence that manipulation of the running variable does not drive our results.
Journal Article
