What are the consequences of global banking for the international transmission of shocks? A quantitative analysis

The global financial crisis of 2008 was followed by a wave of regulatory reforms that affected large banks, especially those with a global presence. These reforms were reactive to the crisis. In this paper we propose a structural model of global banking that can be used proactively to perform counterfactual analysis on the effects of alternative regulatory policies. The structure of the model mimics the US regulatory framework and highlights the organizational choices that banks face when entering a foreign market: branching versus subsidiarization. When calibrated to match moments from a sample of European banks, the model is able to replicate the response of the US banking sector to the European sovereign debt crisis. Our counterfactual analysis suggests that pervasive subsidiarization, higher capital requirements, or ad hoc monetary policy interventions would have mitigated the effects of the crisis on US lending.https://www.nber.org/papers/w25203Published versio

Federal Reserve Bank of Boston

(PRELIMINARY AND INCOMPLETE) This paper starts by unveiling a new empirical regularity: multinational corporations tend to exhibit systematically higher returns and earnings yields than non-multinational firms. Within non-multinationals, exporters tend to have higher earnings yields and returns than firms selling only in their domestic market. To explain this pattern, we develop a real option value model where firms are heterogeneous in productivity, and have to decide whether and how to sell in a foreign market where demand is risky. Firms can serve the foreign market through trade or foreign direct investment, thus becoming multinationals. Multinational firms are more exposed to risk: following a negative shock, they are reluctant to exit the foreign market because they would forgo the option premium (sunk cost) that they paid to become multinationals. The theory provides a complementary explanation for the cross section of returns by exploiting the production side from an international point of view. We calibrate the model to match U.S. export and FDI dynamics, and use it to explain cross-sectional differences in earnings yields and returns

Global Banks' Dynamics and the International Transmission of Shocks

The presence of foreign institutions in the U.S. banking market is substantial. About 20% of the aggregate assets held by banks operating in the U.S. belongs to banking offices that are ultimately owned by a foreign parent. Deposits and loans display a similar pattern over the last two decades, ranging from 15% of total deposits to 30% of the total commercial and industrial loans in hands of foreign owned banking offices. Foreign institutions can enter the U.S. banking market mostly with subsidiaries or branches. The differences between these two types of affiliates are illustrated in Fillat, Garetto, and Götz (2014). Fundamentally, subsidiaries raise independent equity, are subject to capital requirements, make loans, and receive insured and uninsured deposits. Branches' balance sheet instead is aggregated to the foreign parent bank holding company. Hence, branches do not have independent equity and are not subject to capital requirements by themselves. Branches cannot take uninsured deposits either. Branches can exchange funds intra-firm with their parent, while subsidiaries * Fillat: Federal Reserve Bank of Boston

Pd-Cu interaction in Pd/Cu-MCM-41 catalysts: effect of silica source and metal content

Pd/Cu-MCM-41 catalysts for the hydrodechlorination of CF(3)OCFC1CF(2)C1 to CF3COCF=CF2 were prepared. Palladium- and copper-containing samples (Pd/Cu= 1 molar ratio) were synthesized by adding Pd2+ and Cu2+ during the formation of MCM-41, and then the slurries were aged by microwave-hydrothermal treatment. The effect of the silica source (silicates or TEOS) and total metal loading (2.4 and 4.0 wt.%) on the chemical-physical properties and catalytic performances was studied. Bimetallic silicate-derived samples show features similar to those of the pristine MCM-41, regardless of the total metal content. Conversely, the long-range order of the mesoporous structure decreases for TEOS-derived catalysts, and large metal contents seem to alter the structure for these materials. During template removal by thermal treatment, palladium and copper are on the surface of MCM-41 particles, forming Pd1-xCuxO solid solutions whose composition is silica source-dependent. The amount of copper in Pd1-xCuO is greater for TEOS-derived samples. After reduction, both Pd- and Cu-enriched alloys were found by XRD in silicate-derived samples, while XPS measurements indicated that the surface of the catalyst is enriched with copper. XRD and XPS analyses on TEOS samples indicated that the surface Cu/Pd ratio is closer to 1, and fcc PdCu alloys with a high copper content were identified. The composition of metallic particles modifies the selectivity, TEOS-derived catalysts being more selective to the target CF3'OCF=CF2