How the 1981-83 Chilean banking crisis was handled

The banking crisis in Chile in 1981-83 was widespread - representing about 60 percent of the banking system's total portfolio. The crisis arose because of macroeconomic problems and was exacerbated by unsound financial practices. The government was faced with two extreme solutions: to let insolvent banks go bankrupt, or to bail them out, absorbingtheir losses. Some institutions were liquidated, and others were rescued and rehabilitated, depending on their solvency. The government used two types of mechanisms to rehabilitate the banking system. One type was aimed at improving borrowers'capacity to repay loans to the banks. The other was aimed at rebuilding the banking system's capital. The government also strengthened banking supervision by improving loan portfolio analysis and increasing the transparency of financial transactions. The decision to recognize and allocate losses quickly, and to implement comprehensive measures to resolve the banking crisis, were the key to Chile's success in surviving the crisis. Had allocation of losses been delayed, or solutions partial, losses would probably have increased and the system would not have recovered so rapidly.Housing Finance,Banks&Banking Reform,Financial Crisis Management&Restructuring,Financial Intermediation,Economic Theory&Research

Financing Firms in Hibernation during the COVID-19 Pandemic

The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms’ relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from “hibernating,” using the minimum bare cash necessary to withstand the pandemic, while using credit to remain alive until the crisis subdues. Fourth, the existing legal and regulatory infrastructure is ill-equipped to deal with an exogenous systemic shock such as this pandemic. Financial sector policies can help increase the provision of credit, while posing difficult choices and trade-offs

Expression of Transposable Elements in Neural Tissues during Xenopus Development

Transposable elements comprise a large proportion of animal genomes. Transposons can have detrimental effects on genome stability but also offer positive roles for genome evolution and gene expression regulation. Proper balance of the positive and deleterious effects of transposons is crucial for cell homeostasis and requires a mechanism that tightly regulates their expression. Herein we describe the expression of DNA transposons of the Tc1/mariner superfamily during Xenopus development. Sense and antisense transcripts containing complete Tc1-2_Xt were detected in Xenopus embryos. Both transcripts were found in zygotic stages and were mainly localized in Spemann's organizer and neural tissues. In addition, the Tc1-like elements Eagle, Froggy, Jumpy, Maya, Xeminos and TXr were also expressed in zygotic stages but not oocytes in X. tropicalis. Interestingly, although Tc1-2_Xt transcripts were not detected in Xenopus laevis embryos, transcripts from other two Tc1-like elements (TXr and TXz) presented a similar temporal and spatial pattern during X. laevis development. Deep sequencing analysis of Xenopus tropicalis gastrulae showed that PIWI-interacting RNAs (piRNAs) are specifically derived from several Tc1-like elements. The localized expression of Tc1-like elements in neural tissues suggests that they could play a role during the development of the Xenopus nervous system

How collateral laws shape lending and sectoral activity

publisher: Elsevier articletitle: How collateral laws shape lending and sectoral activity journaltitle: Journal of Financial Economics articlelink: http://dx.doi.org/10.1016/j.jfineco.2016.09.005 content_type: article copyright: © 2016 Elsevier B.V. All rights reserved.publisher: Elsevier articletitle: How collateral laws shape lending and sectoral activity journaltitle: Journal of Financial Economics articlelink: http://dx.doi.org/10.1016/j.jfineco.2016.09.005 content_type: article copyright: © 2016 Elsevier B.V. All rights reserved.publisher: Elsevier articletitle: How collateral laws shape lending and sectoral activity journaltitle: Journal of Financial Economics articlelink: http://dx.doi.org/10.1016/j.jfineco.2016.09.005 content_type: article copyright: © 2016 Elsevier B.V. All rights reserved

Essays in Financial Liberalization and the Aggregate Economy

This dissertation consists of three essays on the effects of financial liberalization on the aggregate economy. In the first essay, I analyze empirically the effects of financial deregulation on wage inequality. To identify the causal effect of the reform, I exploit differences in external financial dependence and capital-skill complementarity across industries. I analyze two different episodes of deregulation: across countries within Europe and across states within the U.S. I provide evidence that, in both episodes, financial liberalization increases wage inequality disproportionally in industries with high financial needs and strong complementarity. I also find that the differential effect on relative wages is particularly strong in economies with rigid labor markets, while the effect on relative labor flows is stronger in economies with flexible labor markets.In the second essay, I conduct a quantitative analysis to calculate the effect of financial liberalization on aggregate inequality. I develop a simple two-sector general-equilibrium model with capital and labor market frictions. I calibrate the model in order to match the reduced form results documented in the first essay. According to a back-of-the envelope calculation, financial liberalization explains 20\% and 15\% of the increase in aggregate inequality in the U.K. and the U.S. during the 1980-2000 period, respectively. The simulation also shows that financial liberalization leads to an increase in the level of wages of both types of labor. In the third essay, co-authored with Sebastian Stumpner, we analyze empirically the effects of financial liberalization on total factor productivity (TFP) and capital misallocation. We use a large cross-country firm-level database and find that deregulation increases productivity disproportionally in industries with high financial needs and low asset tangibility. We decompose industry productivity into an average-productivity term and an allocation term, measured by the size-productivity covariance, and find that the industry TFP gains are primarily driven by a reduction in misallocation across firms. We also find that financial liberalization decreases the within-industry variance of the marginal product of capital and decreases the covariance between the marginal product of capital and TFP. Finally, we document that deregulation increases the market share of domestically-owned firms, which ex-ante are more financially constrained

The internal labor markets of business groups

This paper provides novel micro evidence of labor mobility inside business groups. We show that worker flows between group firms are significantly more prevalent than between unaffiliated firms. We also find that groups respond to changing business conditions by reallocating top-occupation workers across affiliated firms. The wages of top workers increase as they move within the group. Internal labor reallocation is stronger when the worker’s origin firm controls the destination firm and in more complex hierarchical structures. Our results are consistent with the hypothesis that groups ease the transfer of intangible inputs, such as management practices, across firms

Age-differentiated minimum wages in developing countries

The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workerswith heterogeneous initial skills gain productivity through experience.We compare two equally binding schemes of single and age-differentiated minimumwages, and find that although differentiated minimumwages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector.We also show that relaxing minimumwage solely for young workers reduces youth unemployment but harms the less skilled ones