BigTech Credit, Small Business, and Monetary Policy Transmission: Theory and Evidence
Yiping Huang, Xiang Li, Han Qiu, Dan Su, Changhua Yu
IWH Discussion Papers,
No. 18,
2022
Abstract
This paper provides both theoretical and empirical analyses of the differences between BigTech lenders and traditional banks in response to monetary policy changes. Our model integrates Knightian uncertainty into portfolio selection and posits that BigTech lenders possess a diminishing informational advantage with increasing firm size, resulting in reduced ambiguity when lending to smaller firms. The model suggests that the key distinction between BigTech lenders and traditional banks in response to shifts in funding costs, triggered by monetary policy changes, is more evident at the extensive margin rather than the intensive margin, particularly during periods of easing monetary policy. Using a micro-level dataset of small business loans from both types of lenders, we provide empirical support for our theoretical propositions. Our results show that BigTech lenders are more responsive in establishing new lending relationships in an easing monetary policy environment, while the differences in loan amounts are not statistically significant. We also discuss other loan terms and the implications of regulatory policies.
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Konjunktur aktuell: Krieg treibt Energiepreise – Hohe Inflation belastet Konjunktur
Konjunktur aktuell,
No. 2,
2022
Abstract
Die Weltwirtschaft ist auch im Sommerhalbjahr verschiedenen schweren Belastungen ausgesetzt, die die Preise stark steigen lassen. Produktionsstilllegungen im Zuge der chinesischen Null-Covid-Strategie und der Angriff gegen die Ukraine heizen die Inflation weltweit an. Auch in Deutschland wird die konjunkturelle Entwicklung durch die mit dem Krieg verbundenen Preissteigerungen sowie unterbrochene Lieferketten schwer belastet. Die konjunkturellen Aussichten für den Sommer sind trüb. Das deutsche Bruttoinlandsprodukt wird im Jahr 2022 um 1,5% zunehmen. In Ostdeutschland liegt der Zuwachs bei 1%.
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A Note of Caution on Quantifying Banks' Recapitalization Effects
Felix Noth, Kirsten Schmidt, Lena Tonzer
Journal of Money, Credit and Banking,
No. 4,
2022
Abstract
Unconventional monetary policy measures like asset purchase programs aim to reduce certain securities' yield and alter financial institutions' investment behavior. These measures increase the institutions' market value of securities and add to their equity positions. We show that the extent of this recapitalization effect crucially depends on the securities' accounting and valuation methods, country-level regulation, and maturity structure. We argue that future research needs to consider these factors when quantifying banks' recapitalization effects and consequent changes in banks' lending decisions to the real sector.
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Understanding Post-Covid Inflation Dynamics
Martín Harding, Jesper Lindé, Mathias Trabandt
Abstract
We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. The nonlinear Phillips curve in our model arises due to a quasi-kinked demand schedule for goods produced by firms. Our model can jointly account for the modest decline in inflation during the Great Recession and the surge in inflation during the Post-Covid period. Because our model implies a stronger transmission of shocks when inflation is high, it generates conditional heteroscedasticity in inflation and inflation risk. Hence, our model can generate more sizeable inflation surges due to cost-push and demand shocks than a standard linearized model. Finally, our model implies that the central bank faces a more severe trade-off between inflation and output stabilization when inflation is high.
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Konjunktur aktuell: Preisschock gefährdet Erholung der deutschen Wirtschaft
Konjunktur aktuell,
No. 1,
2022
Abstract
Der Angriff Russlands auf die Ukraine hat die wirtschaftlichen Rahmenbedingungen in Europa drastisch verschlechtert. Rohstoff- und Energiepreise sind stark gestiegen, und die Sanktionen bringen den gesamten Russlandhandel nahezu zum Erliegen. Auch die deutsche Wirtschaft trifft es vor allem über einen Energiepreisschock, aber auch über unterbrochene Handelsströme und eine allgemeine Verunsicherung. Gleichwohl erhält die Konjunktur von der Aufhebung vieler Pandemie-Restriktionen einen kräftigen Schub. Das deutsche BIP wird 2022 um 3,1% zunehmen. Die ostdeutsche Wirtschaft wird vom Krieg kaum schwerer getroffen als die gesamtdeutsche Wirtschaft.
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How Does Economic Policy Uncertainty Affect Corporate Debt Maturity?
Xiang Li
IWH Discussion Papers,
No. 5,
2022
Abstract
This paper investigates whether and how economic policy uncertainty affects corporate debt maturity. Using a large firm-level dataset for four European countries, we find that an increase in economic policy uncertainty is significantly associated with a shortened debt maturity. Moreover, the impacts are stronger for innovation-intensive firms. We use firms’ flexibility in changing debt maturity and the deviation to leverage target to gauge the causal relationship, and identify the reduced investment and steepened term structure as the transmission mechanisms.
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Monetary Policy through Exchange Rate Pegs: The Removal of the Swiss Franc‐Euro Floor and Stock Price Reactions
Gregor von Schweinitz, Lena Tonzer, Manuel Buchholz
International Review of Finance,
No. 4,
2021
Abstract
The Swiss National Bank abolished the exchange rate floor versus the Euro in January 2015. Using a synthetic matching framework, we analyze the impact of this unexpected (and therefore exogenous) policy change on the stock market. The results reveal a significant level shift (decline) in asset prices following the discontinuation of the minimum exchange rate. As a novel finding in the literature, we document that the exchange‐rate elasticity of Swiss asset prices is around −0.75. Differentiating between sectors of the Swiss economy, we find that the industrial, financial and consumer goods sectors are most strongly affected by the abolition of the minimum exchange rate.
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Technological Innovation and the Bank Lending Channel of Monetary Policy Transmission
Iftekhar Hasan, Xiang Li, Tuomas Takalo
IWH Discussion Papers,
No. 14,
2021
Abstract
This paper studies whether and how banks’ technological innovations affect the bank lending channel of monetary policy transmission. We first provide a theoretical model in which banks’ technological innovation relaxes firms’ earning-based borrowing constraints and thereby enlarges the response of banks’ lending to monetary policy changes. To test the empirical implications, we construct a patent-based measurement of bank-level technological innovation, which can specify the nature of technology and tell whether it is related to the bank’s lending business. We find that lending-related innovations significantly strengthen the transmission of the bank lending channel.
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Dilemma and Global Financial Cycle: Evidence from Capital Account Liberalisation Episodes
Xiang Li
IWH Discussion Papers,
No. 13,
2021
Abstract
By focusing on the episodes of substantial capital account liberalisation and adopting a new methodology, this paper provides new evidence on the dilemma and global financial cycle theory. I first identify the capital account liberalisation episodes for 95 countries from 1970 to 2016, and then employ an augmented inverse propensity score weighted (AIPW) estimator to calculate the average treatment effect (ATE) of opening capital account on the interest rate comovements with the core country. Results show that opening capital account causes a country to lose its monetary policy independence, and a floating exchange rate regime cannot shield this effect. Moreover, the impact is stronger when liberalising outward and banking flows.
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Macroprudential Policy and Intra-Group Dynamics: The Effects of Reserve Requirements in Brazil
Chris Becker, Matias Ossandon Busch, Lena Tonzer
Journal of Corporate Finance,
December
2021
Abstract
We examine whether liquidity dynamics within banking groups matter for the transmission of macroprudential policy. Using matched bank headquarters-branch data for identification, we find a lending channel of reserve requirements for municipal branches whose headquarters are more exposed to the policy tool. The result is driven by the 2008–2009 crisis and is stronger for state-owned branches, especially when being less profitable and liquidity constrained. These findings suggest the presence of cross-regional distributional effects of macroprudential policies operating via internal capital markets.
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