48,698 research outputs found
Macroeconomic uncertainty and banks' lending decisions: The case of Italy
This paper discusses the role that macroeconomic uncertainty plays in banksĂâ decisions on the optimal asset allocation. Using a portfolio model recently proposed in the literature, the paper aims at disentangling how Italian banks choose between loans and risk-free assets when uncertainty on macroeconomic conditions increases. The econometric results confirm that macroeconomic uncertainty is a significant determinant of banksĂâ investment decisions, also after controlling for other factors. In periods of increasing turmoil, banksĂâ ability to accurately forecast future returns is hindered and herding behaviour tends to emerge, as witnessed by the reduction of the cross-sectional variance of the share of loans held in portfolio.bank, business cycle, uncertainty, lending decisions, GARCH
Macroeconomics Uncertainty and Banks' Lending Decisions: The Case of Italy
This paper discusses the role that macroeconomic uncertainty plays in banksâ choices regarding the optimal asset allocation. Following the portfolio model proposed by Baum et al. (2005), the paper aims at disentangling how Italian banks choose between loans and risk-free assets when the uncertainty on macroeconomic conditions increases. The econometric results confirm that macroeconomic uncertainty is a significant determinant of Italian banksâ investment decisions, also after controlling for other factors. In periods of increasing turmoil, bank-specific ability to accurately forecast future returns is hindered and herding behaviour tends to emerge, as witnessed by the reduction of the cross-sectional variance of the share of loans held in portfolio.Bank, business cycle, uncertainty, lending decisions, GARCH
Foreign Banks in Transition Economies: Small Business Lending and Internal Capital Markets
On the basis of focused interviews with managers of foreign parent banks and their affiliates in Central Europe and the Baltics, we analyse foreign banksâ small business lending and internal capital markets. This allows us to complement the standard empirical literature, which has difficulty in measuring important variables such as lending technologies and capital allocation systems. We find that the acquisition of local banks by foreign banks has not led to a persistent bias in these banksâ credit supply towards large multinational corporations. Instead, increased competition and the improvement of subsidiariesâ lending technologies have led foreign banks to gradually expand into the SME and retail markets. Second, we show that local bank affiliates are strongly influenced by the capital allocation and credit steering mechanisms of the parent bank. The credit growth of subsidiaries therefore potentially depends on the financial health of the foreign based parent bank.foreign banks, transition economies, small business lending, internal capital markets
Lending Cycles and Real Outcomes: Costs of Political Misalignment. LEQS Paper No. 139/2018 December 2018
We document a strong political cycle in bank credit and industry outcomes in Turkey.
In line with theories of tactical redistribution, state-owned banks systematically adjust
their lending around local elections compared with private banks in the same province
based on electoral competition and political alignment of incumbent mayors. This
effect only exists in corporate lending as opposed to consumer loans. It creates credit
constraints for firms in opposition areas, which suffer drops in employment and sales
but not firm entry. There is substantial misallocation of financial resources as
provinces and industries with high initial efficiency suffer the greatest constraints
Common Capital: A Thought Experiment in Cross-Border Resolution
Cross-border bank resolution efforts focus on burden-sharing between bank owners, private creditors and the public. There is little talk of burden-sharing among governments, despite the rich history of governments trying to stick one another with the cost of financial conglomerate failures. There is an unspoken fear that acknowledging the need to allocate losses among governments would undermine post-crisis pledges of No More Bailouts. This symposium essay argues for making government stakes in private financial firms more transparent, and for using the contingent public share as a key to loss allocation among governments in cross-border banking crises
Lost in the Mail: A Field Experiment on Crime
Crime in the mail sector can hamper the development of electronic markets. We use a field experiment to detect crime and measure its differential impacts. We subtly, and realistically, manipulate the content and information available in mail sent to households and detect high levels of shirking and stealing. Eighteen percent of the mail never arrived at its destination, and even more was lost if there was even a slight hint of something additional inside the envelope. Our study demonstrates that privatization has been unable to extricate moral hazard and that crime is strategic and not equally distributed across the population.
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