Research

Employing the methodology put forward by Davis and Haltiwanger (1992) for the measurement of job reallocation, we construct measures of credit reallocation across firms in the U.S. states. We then exploit the staggered deregulation of the credit markets of the states of the eighties as a natural experiment to identify an exogenous shock to the process of credit reallocation. The analysis reveals that the credit market deregulation intensified inter-firm credit reallocation in the states, while leaving aggregate credit growth essentially unaltered. In turn, the increased dynamism in credit reallocation allowed to systematically transfer funds to more productive firms in a more flexible way.

This paper studies how changes in household credit affect small business lending. First, we empirically investigate the effect of an exogenous increase in household credit on small business credit by exploiting the 1997 liberalization of home equity lending in Texas. We find that the relaxation of borrowing constraints on household lending crowds out business lending, as small business loan growth declines by roughly 20 percentage points following the liberalization. However, the negative effect is weaker in counties that experienced strong house price growth, providing evidence for a collateral effect. Then, we build a closed economy model with borrowing constraints that differentiates between household and business lending and study their interaction. We show that an expansion in household credit leads to a decline in firm borrowing. Even though there is a positive collateral effect, the crowding out effect dominates in both the theoretical model and the empirical analysis.

Works in Progress
International Monetary Spillovers to Frontier Financial Markets: Evidence from Bangladesh - with Rashed Sardar