The collapse in bank lending in 2008-09 led directly to falling employment at nonfinancial firms

Does the health of banks on Wall Street affect economic outcomes on Main Street? After the 2008-09 financial crisis, bank lending to nonfinancial firms declined significantly, with effects on employment and incomes. Drawing on data from over 2,000 firms, Gabriel Chodorow-Reich finds that credit restrictions accounted for between one-third and one-half of the employment decline at small and medium firms in the year following the Lehman bankruptcy. He also finds that the ‘stickiness’ of bank-borrower relationships meant that many firms that that had pre-crisis links with less healthy lenders suffered more than those that had relationships with healthier ones

Returns on FDI: Does the U.S. Really Do Better?

According to the U.S. external accounts, U.S. investors earn a significantly higher rate of return on their foreign investments than foreigners earn in the United States. This continued strong performance has produced a positive net investment income balance despite the deterioration in the U.S. net asset position in recent years. We examine the major competing explanations for the apparent differential between the rates of return. In particular, almost the entire difference occurs in FDI, where American firms operating abroad appear to earn a persistently higher return than that earned by foreign firms operating in the U.S. We first review a number of explanations in the literature for this differential. We then offer some new evidence on the role of income shifting between jurisdictions with varying rates of taxation. Using country-specific income and tax data, we find that about one-third of the excess return earned by U.S. corporations abroad can be explained by firms reporting "extra" income in low tax jurisdictions of their affiliates.

Gender Differences in Russian Colour Naming

In the present study we explored Russian colour naming in a web-based psycholinguistic experiment (http://www.colournaming.com). Colour singletons representing the Munsell Color Solid (N=600 in total) were presented on a computer monitor and named using an unconstrained colour-naming method. Respondents were Russian speakers (N=713). For gender-split equal-size samples (NF=333, NM=333) we estimated and compared (i) location of centroids of 12 Russian basic colour terms (BCTs); (ii) the number of words in colour descriptors; (iii) occurrences of BCTs most frequent non-BCTs. We found a close correspondence between females’ and males’ BCT centroids. Among individual BCTs, the highest inter-gender agreement was for seryj ‘grey’ and goluboj ‘light blue’, while the lowest was for sinij ‘dark blue’ and krasnyj ‘red’. Females revealed a significantly richer repertory of distinct colour descriptors, with great variety of monolexemic non-BCTs and “fancy” colour names; in comparison, males offered relatively more BCTs or their compounds. Along with these measures, we gauged denotata of most frequent CTs, reflected by linguistic segmentation of colour space, by employing a synthetic observer trained by gender-specific responses. This psycholinguistic representation revealed females’ more refined linguistic segmentation, compared to males, with higher linguistic density predominantly along the redgreen axis of colour space

Macroeconomic Lessons from the Great Recession: Evidence using Microeconomic Methods

This dissertation reflects two recent developments in the study of economics. The first concerns real world events. Beginning in 2007, the countries of Western Europe and the United States experienced a series of financial shocks and an economic downturn unprecedented in their experience since the Great Depression seventy years before. Dramatic changes in the economy raise new questions or renew old lines of inquiry. During the recession, many countries turned to discretionary fiscal stimulus packages. The size of these packages and the severity of the downturns make understanding their effectiveness of critical importance. The first chapter in this dissertation analyzes empirically the effects on employment of one particular component of the fiscal policy response in the United States. The Great Recession also renewed interest in the importance of credit to firms. The second chapter in this dissertation attempts to answer whether the withdrawal of credit following the bankruptcy filing of Lehman Brothers played a role in propagating the Great Recession.The second development consists of the application of unit-level datasets and applied microeconomic methods to answer questions of macroeconomic importance. This research program recognizes that cross-sectional variation across individual units often exceeds the time-series variation of an aggregate. Moreover, cross-sectional studies can hold constant many macroeconomic variables that might otherwise confound the identification of a causal effect. The studies of fiscal policy and firm credit in chapters 1 and 2 apply microeconomic methods. A full answer to these questions, however, requires a correspondence between the cross-sectional analysis and the general equilibrium outcomes. In general equilibrium, spending in one geographic area may affect employment in another. Likewise, a firm not directly affected by the withdrawal of bank credit may still change its employment in response to the adjustments of other firms. One approach to the problem of general equilibrium involves building a theoretical model that nests the cross-sectional analysis as well as the general equilibrium effects. The third chapter of this dissertation demonstrates this approach in the context of the effect of the supply of credit

Macroeconomic Lessons from the Great Recession: Evidence using Microeconomic Methods

This dissertation reflects two recent developments in the study of economics. The first concerns real world events. Beginning in 2007, the countries of Western Europe and the United States experienced a series of financial shocks and an economic downturn unprecedented in their experience since the Great Depression seventy years before. Dramatic changes in the economy raise new questions or renew old lines of inquiry. During the recession, many countries turned to discretionary fiscal stimulus packages. The size of these packages and the severity of the downturns make understanding their effectiveness of critical importance. The first chapter in this dissertation analyzes empirically the effects on employment of one particular component of the fiscal policy response in the United States. The Great Recession also renewed interest in the importance of credit to firms. The second chapter in this dissertation attempts to answer whether the withdrawal of credit following the bankruptcy filing of Lehman Brothers played a role in propagating the Great Recession.The second development consists of the application of unit-level datasets and applied microeconomic methods to answer questions of macroeconomic importance. This research program recognizes that cross-sectional variation across individual units often exceeds the time-series variation of an aggregate. Moreover, cross-sectional studies can hold constant many macroeconomic variables that might otherwise confound the identification of a causal effect. The studies of fiscal policy and firm credit in chapters 1 and 2 apply microeconomic methods. A full answer to these questions, however, requires a correspondence between the cross-sectional analysis and the general equilibrium outcomes. In general equilibrium, spending in one geographic area may affect employment in another. Likewise, a firm not directly affected by the withdrawal of bank credit may still change its employment in response to the adjustments of other firms. One approach to the problem of general equilibrium involves building a theoretical model that nests the cross-sectional analysis as well as the general equilibrium effects. The third chapter of this dissertation demonstrates this approach in the context of the effect of the supply of credit

Online Appendix: Secular Labor Reallocation and Business Cycles -Correlation of Predicted Reallocation With Other Variables Dependent variable: Bartik reallocation per year (1) (2) (3) (4) (5) (6) Panel A: recession-recovery cycles: Recession-Recovery Exp

B. Comparison of R a to Other Measures In a seminal paper, To illustrate the differences from our measure R a,t,t+j defined in equation Our measure also has a close connection to the job reallocation rate defined by Davis and Haltiwanger (1992, p. 828 Thus, up to the scale normalization, our measure coincides exactly with the Davis and Haltiwanger (1992) measure evaluated over a full cycle rather than period-by-period. C. Additional Details on the Empirical Analysis In this Appendix we provide further detail of the area-specific time-varying control variables and report partial correlations with predicted reallocation, a version of table 5 of the main text showing the coefficients on the control variables, and additional details about the Rotemberg weights. The MSA/CSA level variables include employment growth over the 4 years before the cycle start; trend growth of the working-age population, measured as the log change between 5 and 1 years before the cycle start in the population of persons age 15-69; 2 house price growth over the 4 years before the cycle start; 3 area size, measured by the log of sample mean employment; and the Herfindahl of industry employment concentration at the cycle start. 2 We interpolate annual county-level population data from the Census Bureau to obtain a monthly series of population. We measure the trend up to 1 year before the cycle change to ensure the population trend does not incorporate data realizations after the cycle change. 3 We construct area house price indexes using the Freddie Mac MSA house price indexes, available beginning in 1975. For CSAs combining multiple MSAs, we construct a CSA index as a geometric weighted average of the MSA indexes, using 1990 employment as weights. Noting that our data start in 1975 and the first national recession begins in 1980, we use a 4 year change to minimize loss of observations while still allowing for business cycle frequency lag length. 4 The correlation of Bartik predicted reallocation and Bartik predicted employment after partialling out the national month fixed effects is -0.32 in an expansion and -0.59 in a recession-recovery. close to that of our baseline coefficient. The weight formula for industry i in period t is Consumers across all islands combine industry goods sold at price P a,j,t using a CES aggregator, such that total output of island a is given by 2 and where P a,t = 1 j=0 (P a,j,t ) 1−ξ 1 1−ξ is the local producer price index. D.2. Trade and market clearing The local consumption is a CES aggregate of goods produced in all regions of the currency union: where C ab,t denotes consumption in island a of the composite retail good produced on island b. The law of one price holds, implying the demand functions is the local consumer price index. Thus, consumer price indices across islands may differ if the consumption weightsτ ab,t differ as a result of, inter alia, home bias in consumption. Market clearing in the final goods market requires D.3. Financial markets Financial markets are incomplete across areas. The only financial instrument that can be traded is a one-period nominal bond. We let B a,t denote total local holdings of the bond. The nominal interest rate on the bond, R t +μ a,t , includes a spreadμ a,t over the gross nominal interest rate set by the central bank R t . We follow Schmitt-Grohé and Uribe where ρ µ > 0 but small. This formulation ensures a stationary steady state for local areas under incomplete markets. The component µ t is exogenous and common to all areas. We use a shock to µ t to simulate a demand-induced recession. The per capita nominal domestic net financial asset position then evolves according to: Zero net supply of bonds at all times implies the market clearing condition, a B a,t = 0. We set initial bond allocations to zero for all areas, B a,0 = 0 ∀a. D.4. Government policy The central bank follows a standard interest rate rule that obeys the Taylor principle: is a population-weighted geometric average of local consumer price inflation rates. In the A = 2 small-large calibration, the nominal interest rate R t evolves exogenously with respect to local economic conditions in the small area, D.5. Household optimization problem Finally, each island resident has instantaneous utility u(C a,t /l a,t ), where C a,t /l a,t is consumption per capita. The representative household on an island maximizes the expected discounted 8 sum of total per-period utility accruing to the residents of the island each period and subject to a flow budget constraint: where the period utility function takes the form u(C a,t+s /l a,t+s ) = (C a,t+s /l a,t+s ) 1−σ /(1 − σ). The island discount factor used in equations and the corresponding household first order condition is = 1. D.6. Wage Rigidity We implement the downward nominal wage constraint as follows. We first calculate the Nash-bargain job surplus J * as The implied Nash-bargain real wage in each industry is then, We then check whether this Nash-bargain real wage violates the downward nominal wage constraint, For convenience we reproduce the key labor market equations (10)-(13) from the text: 5 Alternatively, we could implement the Nash solution also at t+1, so w * We calibrate parameters to a monthly frequency. We set the worker's bargaining power β to 0.6 based on a matching efficiency of 0.4 and the Hosios condition. We set D = 0.9967 for an annual interest rate of 4%. We obtain a target for the steady state job finding rate f appropriate to a two state labor market model of 0.5 by updating the procedure described in Shime

Saving and Demographic Change: The Global Dimension

This paper uses a panel data set of 85 countries covering 1960-2005 to investigate the macroeconomic linkages between national rates of saving and investment and population aging. The issue takes on added significance because of the recent suggestion that the decline in global interest rates has been driven by demographic changes in the industrial economies. We do find a significant correlation between the age composition of the population and nations’ rates of saving and investment, but the effects vary substantially by region. They are very strong for the non-industrial economies of Asia, but weak in the high-income countries. We also find evidence of demographic effects on both the public and private components of national saving. Furthermore, we conclude that the demographic effects on saving will be less disruptive than sometimes believed because of offsetting declines in investment. However, the effects on saving are stronger than those for investment, implying that most aging economies will ultimately be pushed in the direction of current account deficits. In contrast to some of the recent discussion, we find that demographic change is already exerting a downward pressure on saving in the high-income economies and that the current evidence of a global saving glut is related more to the weakness of investment – particularly in Asia – and the high short-run saving of the oil-producing countries. We conclude with a discussion of why the effects appear to be so strong in Asia.national saving rates, populating aging, global interest rates, investment, demographic change