Essays in empirical macro-finance
- Autores: Andrea Fabiani
- Directores de la Tesis: José Luis Peydró Alcalde (dir. tes.), Fernando Broner (codir. tes.)
- Lectura: En la Universitat Pompeu Fabra ( España ) en 2021
- Idioma: español
- Tribunal Calificador de la Tesis: Enrico Sette (presid.), Fazad Saidi (secret.), Michael Koetter (voc.)
- Programa de doctorado: Programa de Doctorado en Economía, Finanzas y Empresa por la Universidad Pompeu Fabra
- Materias:
- Enlaces
- Tesis en acceso abierto en: TDX
- Resumen
This thesis analyzes whether financial intermediation, by both banks and other financial investors, influences non-financial companies (real and financial) outcomes. The question is tackled from multiple perspectives and the results validate the hypothesis that financing frictions at the level of the firm - and of its lenders as well - can have a significant impact on the transmission of financial shocks to the real economy. Moreover, analyzing different macroeconomic policies, including monetary policy and macroprudential shocks, the different chapters of this thesis also reveal that financial intermediaries and bond-market investors alike have an important role in the the pass-through of such policy interventions to non-financial companies (NFCs hereafter).
In detail, the first chapter asks whether monetary policy shocks alter the maturity structure of US corporate debt. This question is important in that debt maturity is key for explaining NFCs’ ability to withstand negative shocks, as documented by a large empirical literature on the last Great Financial Crisis of 2008-2009 and on the current COVID-19 pandemic. The analysis exploits conventional firm-level and macroeconomic datasets for the US economy, such as Compustat, Mergent FISD and CRSP Mututal Funds data. The results indicate that an expansionary monetary policy (interest rate) shock overall lengthens debt maturity for the US non-financial corporate sector. Furthermore, this effect entirely concentrates among very large firms, i.e. those in the top asset-size quartile of the respective industry-level distribution. These findings are somewhat surprising: in fact, interest rate shocks are typically expected to alter the capital structure of smaller NFCs. However, a simple model featuring firm-level financing frictions and reach for yield by financial investors rationalizes the empirical facts. When the interest rate goes down, financial investors increase risk-taking, thereby expanding their demand for long-term debt securities. Larger firms with easier access to bond financing accommodate the upward demand shift and obtain a substantial discount in their financing costs. Further empirical evidence on the response of corporate bonds’ issuance by large companies and holdings by mutual funds validates such mechanism.
The second and third chapter analyze the effects of prudential capital controls on corporate debt and real outcomes. This policy is at the center stage of an important debate (in both policy and academic circles) about the potential benefits of temporary restrictions to capital mobility, which might improve financial stability and/or strengthen the effectiveness of national macroeconomic policies. Both papers in this thesis exploit the recent pre-Crisis experience of Colombia, which introduced a tax on foreign debt in 2007, and take advantage of rich administrative and confidential loan-level and firm-level datasets. A first article (i.e., the second chapter of the thesis) shows that capital controls reduce credit to NFCs during a boom, in particular for NFCs with weaker relationships with domestic banks, which cannot substitute the forgone credit from abroad with financing from their national lenders. For these firms, exposure to capital controls is associated to a cut in imports during the boom. However, there is also evidence of prudential benefits, namely an increase in exports during the subsequent bust, larger for riskier and/or financially constrained firms, which otherwise tend to be more negatively impacted by high levels of leverage during major financial downturns.
The third chapter of the thesis exploits the same policy and data to understand whether capital controls and/or other domestic macroprudential measures (such as an increase in reserve requirements on domestic deposits) strengthen the transmission of monetary policy rates to credit supply. The findings suggest that, under capital mobility, the pass-through is weakened by a carry-trade lending strategy by banks. As a matter of fact, in reaction to an increase in the local policy rate, the interest rate differential against the financial center (i.e., the US) goes up. Banks respond by increasing their borrowing in cheap foreign currency and expanding their credit supply in domestic currency, thereby gaining (at least) the interest rate differential. Capital controls tax foreign debt and halt the carry, contributing to re-establishing a more negative relation between the monetary policy rate and credit supply. Differently, domestic macroprudential measures cut credit supply directly, rather than through their influence on the transmission of monetary policy rates. Additionally, we find that reliance on foreign funding and on domestic deposits are strongly negatively correlated across banks’ balance sheets, so that banks more impacted by capital controls are less exposed to domestic macroprudential measures, and vice versa. Overall, this study establishes a prudential Tinbergen rule: taming a boom driven by both foreign and domestic liquidity requires two policy instruments, capital controls and domestic macroprudential measures.
