Abstract: Drawdowns on credit commitments by firms reduce a bank’s regulatory capital ratio. Using the Austrian Credit Register, we provide novel evidence that during the 2008-09 financial crisis, capital-constrained banks managed this concern by substantially cutting partly or fully unused credit commitments. Controlling for a bank’s capital position, we also find that greater liquidity problems induced banks to considerably cut such credit commitments during the crisis. These results suggest that banks actively manage both capital and liquidity risk caused by undrawn credit commitments in periods of financial distress, but thereby reduce liquidity provision to firms exactly when they need it most.
Abstract: We analyse the local effect of exogenous shocks to the value of mineral deposits at the district level in Indonesia using a panel of manufacturing plants. We introduce heterogeneity in natural resource extraction methods, which helps to explain the mixed evidence found in the `Dutch disease’ literature. In areas where mineral extraction is relatively capital-intensive, mining booms cause virtually no upward pressure on manufacturing wages, and both producers of traded and local goods benefit from mining booms in terms of employment. In contrast, labor-intensive mining booms drive up local manufacturing wages such that traded-goods producers reduce employment.
Democratisation, Leader Education and Growth: Evidence from Indonesia
(joint with Steven Poelhekke)
Abstract: Using plant-level census data, we show that the performance of Indonesian manufacturing under the first democratically elected local district mayor positively depends on the mayor’s education level. Survey-based evidence suggests that underlying mechanisms are an improvement of local infrastructure and a smaller tax burden compared to less educated mayors. Our estimates are plausibly causal since the year of democratisation varies across districts and is exogenous, and districts with differential mayor education levels exhibit parallel trends in manufacturing pre-democratisation.
WORK IN PROGRESS:
Politics and Financial Intermediation: Evidence from Brazil (joint with Matias Ossandon Busch)