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on Financial Development and Growth |
| By: | Gabriel Chodorow-Reich; Plamen T. Nenov; Vitor Santos; Alp Simsek |
| Abstract: | We use data on stock portfolios of Norwegian households to show that stock market wealth increases entrepreneurship by relaxing financial constraints. Our research design isolates idiosyncratic variation in household-level stock market returns. An increase in stock market wealth increases the propensity to start a firm, with the response concentrated in households with moderate levels of financial wealth, for whom a 20 percent increase in wealth due to a positive stock return increases the likelihood to start a firm by about 20%, and in years when the aggregate stock market return in Norway is high. We develop a method to study the effect of wealth on firm outcomes that corrects for the bias introduced by selection into entrepreneurship. Higher wealth causally increases firm profitability, an indication that it relaxes would-be entrepreneurs’ financial constraints. Consistent with this interpretation, the pass-through from stock wealth into equity in the new firm is one-for-one. |
| JEL: | E22 E44 G50 L26 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32643 |
| By: | İrem Güçeri; Xipei Hou; Jing Xing; Irem Guceri |
| Abstract: | We examine how investor-level tax incentives affect financing for start-ups using the introduction of a generous tax deduction for qualified angel and VC investment in China as a quasi-natural experiment. We find that the tax incentive increases funding for eligible start-ups, with stronger responses from larger and more experienced investors. The tax incentive leads to substitution between eligible and non-eligible investments. There is no evidence that the tax incentive lowers investment quality. We further show that the investor-level tax incentive encourages firm entry into affected industries, especially in cities more exposed to venture capital funds. |
| Keywords: | venture capital, angel investment, tax incentives, entrepreneurship |
| JEL: | G24 G32 H25 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11180 |
| By: | Halil Ýbrahim Aydin; Cagatay Bircan; Ralph De Haas |
| Abstract: | Blended finance programs combine public and private funding to ease credit constraints of specific firm segments. While rapidly gaining popularity, little evidence exists on their economic impact. To address this gap, we match credit registry data with firm level tax records to trace out the impacts of a blended finance program for female entrepreneurs in Türkiye. Using a synthetic difference-in-differences estimator, we show that participating banks durably increase lending to women-both in absolute terms and relative to male entrepreneurs. The average treatment effect on treated banks' share of lending to female entrepreneurs is 22 per cent. Banks expand credit to existing borrowers, poach clients from competitors, and crowd in first-time borrowers. Female clients of treated banks increase net borrowing and investment, especially those with higher capital productivity. Beneficiary firms grow their sales and profits, diversify suppliers, and exit less. There are no discernible impacts on aggregate firm populations at the district level, reflecting the program's relatively modest scale. Implications for program design are discussed. |
| Keywords: | Blended finance; Credit access; Female entrepreneurship; Misallocation |
| JEL: | D22 G21 G32 H81 J16 L26 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2408 |
| By: | Laura Policardo; Edgar J. Sanchez Carrera |
| Abstract: | The lack of data has challenged the study of the effect of wealth inequality on economic growth despite it being at the core of the international debate. Scholars have not found a unanimous effect of wealth inequality on economic growth for the last few years. In this paper, we provide a possible explanation of why wealth inequality might have a different effect on growth in different countries. So, we claim that a possible reason for such different effects could be the different socio-economic structure of the population and, more precisely, the level of economic segregation. We prove this effect with numerical simulations calibrated on accurate data. |
| Keywords: | Economic Growth; Wealth Inequality; Luxury Non-productive Assets; United States; France; Residential Segregation. |
| JEL: | D31 O47 O51 O52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_09.rdf |
| By: | Gustavo Pereira Serra (Department of Economics, Sao Paulo State University (UNESP), Brazil) |
| Abstract: | This paper analyzes the economic effects of student loans in a segmented educational market. The motivation here draws upon some studies that verify differences in labor income returns and repayment difficulties depending on the characteristics of the institution attended by the student. I put forward a neo-Kaleckian model that considers three types of households: rentiers (RH), lower-skilled workers (LSW), and higher-skilled workers (HSW). Moreover, a cost-minimizing representative firm combines physical capital and labor in effective units in the production process, which also features some labor skill substitution, thus generating a bargaining process between the different worker groups and firms that determines the wage gap. The main result is that, for a debt-financed human capital investment, the conditions that drive long-term economic growth do not necessarily align with those that reduce the wage gap and household debt. In fact, in some cases, widening the wage gap may be a necessary condition for boosting economic activity and human capital accumulation. However, this investment might not reduce the wage gap and could raise concerns about household debt. |
| Keywords: | Household debt, student loans, capacity utilization, human capital |
| JEL: | E12 E22 E24 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2412 |
| By: | James B. Davies; Rodrigo Lluberas; Daniel Waldenström; James Davies |
| Abstract: | This paper examines long-term trends in aggregate wealth and inheritance and in their distributions, focusing on developed economies. A key stylized fact is that wealth is less equally distributed than income. Financial assets predominate among the wealthy, while owner-occupied housing is crucial for middle groups, so higher stock prices raise wealth inequality while house price increases do the opposite. Inheritances exacerbate absolute wealth inequality but reduce rel-ative inequality. Wealth inequality declined in advanced Western countries during the first half of the 20th century, then stabilized or rose. Aggregate wealth-to-income ratios have fluctuated, re-flecting both market and policy influences, whereas inherited wealth proportions have declined over the long run. Continued increases in the value of employer-based pensions, housing and social security wealth in recent decades have acted to reduce wealth inequality, offsetting the disequalizing impact of financial asset price increases to a varying extent across countries. |
| Keywords: | wealth, inheritance, inequality, saving, history |
| JEL: | E01 H55 D15 D31 E21 G51 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11183 |
| By: | Fandiño, Pedro; Kerstenetzky, Celia; Simões, Tais |
| Abstract: | Wealth inequality has gained importance in the international debate following the publication of Capital in the 21st Century, by Thomas Piketty, which contains systematic data on the size and evolution of the phenomenon in advanced economies over the last few centuries. In particular, Piketty's research reveals an important decrease in wealth concentration throughout the 20th century, a decrease that has not been sustained in the first decades of the 21st century. What can be said about the levels and historical trajectory of wealth inequality in Brazil, one of the world’s most unequal countries? We investigated all available estimates since the 17th century. The work is organized based on the different sources and approaches used to construct the estimates, which cannot be directly obtained from national household surveys or censuses. Two conclusions stand out: a) wealth concentration presents extreme levels and notable stability over time, despite profound transformations in the composition of assets; and b) all available estimates have significant limitations. The availability of adequate public data, along with improvements in the procedures employed so far, is essential for the development of a literature on wealth inequality in the country – the first step towards effective public engagement with the issue. |
| Keywords: | wealth inequality; property; assets; Brazil; wealth concentration |
| JEL: | D31 D63 E01 |
| Date: | 2024–06–27 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123988 |
| By: | Tianbao Zhou; Zhixin Liu; Yingying Xu |
| Abstract: | The deep financial turmoil in China caused by the COVID-19 pandemic has exacerbated fiscal shocks and soaring public debt levels, which raises concerns about the stability and sustainability of China's public debt growth in the future. This paper employs the Markov regime-switching model with time-varying transition probability (TVTP-MS) to investigate the growth pattern of China's public debt and the impact of financial variables such as credit, house prices and stock prices on the growth of public debt. We identify two distinct regimes of China's public debt, i.e., the surge regime with high growth rate and high volatility and the steady regime with low growth rate and low volatility. The main results are twofold. On the one hand, an increase in the growth rate of the financial variables helps to moderate the growth rate of public debt, whereas the effects differ between the two regimes. More specifically, the impacts of credit and house prices are significant in the surge regime, whereas stock prices affect public debt growth significantly in the steady regime. On the other hand, a higher growth rate of financial variables also increases the probability of public debt either staying in or switching to the steady regime. These findings highlight the necessity of aligning financial adjustments with the prevailing public debt regime when developing sustainable fiscal policies. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.02183 |
| By: | Edgar Silgado-Gómez (BANCO DE ESPAÑA) |
| Abstract: | This paper investigates the impact and the transmission of uncertainty regarding the future path of government finances on economic activity. I first employ a data-rich approach to extract a novel proxy that captures uncertainty surrounding public finances, which I refer to as sovereign uncertainty, and demonstrate that the estimated measure exhibits distinct fluctuations from macro-financial and economic policy uncertainty indices. Next, I analyse the behaviour of sovereign uncertainty shocks and detect the presence of significant and long-lasting negative effects in the financial and macroeconomic sectors using state-of-the-art identification strategies, within the context of a Bayesian vector autoregression framework. I show that a shock to sovereign uncertainty differs from a macro-financial uncertainty shock originating from disturbances in the private sector —while the former persistently dampens the economy in the medium run, the latter displays a short-lived response in real activity. Lastly, I study the role of sovereign uncertainty in a New Keynesian dynamic stochastic general equilibrium model augmented with recursive preferences and financial intermediaries. I find that a sovereign uncertainty shock in the model is able to capture the empirical slowdowns in economic aggregates if monetary policy decisions are directly influenced by the shock. The model also emphasizes the importance of financial frictions in transmitting the effects of sovereign uncertainty shocks and highlights the minor role played by nominal rigidities. |
| Keywords: | sovereign uncertainty index, government finances, economic activity, event-based identification, Bayesian VARs, non-linear DSGE models |
| JEL: | C32 E32 E44 E60 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2423 |
| By: | Violeta A. Gutkowski |
| Abstract: | This paper focuses on the significant growth of domestic credit once the debt is restructured and shows that is not correlated with the size of the haircut. Second, it performs an event study around Ecuador’s sovereign default and restructuring of 2008-2009 to study changes in domestic bank lending behavior. After external debt restructuring, private lending increased the most for banks highly exposed to public debt. Finally, it provides a simple model were uncertainty about the return on government external debt during default has spillover effects on the domestic economy by creating dispersion in beliefs across domestic banks, which leads to a misallocation of credit. External debt restructuring eliminates domestic belief heterogeneity by making the return on bonds observable to everyone. This simple framing is not only consistent with the substantial growth in domestic credit upon debt restructuring but also with its independence from the haircut size observed in the data. |
| Keywords: | banks; beliefs; sovereign debt restructuring; uncertainty |
| JEL: | D8 E44 H63 |
| Date: | 2024–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98514 |
| By: | Baki Cem Sahin |
| Abstract: | [EN] The debates surrounding zombie firms have been reinvigorated by the implementation of support programs to mitigate the effects of the COVID-19 pandemic. Zombie lending poses threats to the economy by distorting the efficient allocation of resources and diminishing overall production capacity. Furthermore, zombie lending raises financial stability risks. This study delves into zombie lending, with particular interest in how it evolves and its effects in Turkiye. The findings reveal important outcomes. Firstly, the ratio of zombie firms in Turkiye has decreased after the COVID-19 pandemic subsequent to reaching its peak in 2020. Secondly, main creditor banks have been less inclined to cut credit lines to financially distressed firms, and this may have contributed to zombification. Lastly, zombie firms exert negative spillover to other firms. These findings emphasize that the challenges posed by zombie lending should be addressed to ensure the efficient allocation of resources, strengthen production, and safeguard financial stability. [TR] COViD-19 pandemisinin etkilerini azaltmaya yonelik destek programlariyla zombi firmalara iliskin tartismalar yeniden canlanmistir. Zombi krediler kaynaklarin verimli dagilimini bozarak ve ekonomideki uretim kapasitesini azaltarak ekonomiye tehdit olusturmaktadir. Ayrica zombi krediler finansal istikrara yonelik riskleri artirmaktadir. Bu calisma, zombi kredileri Turkiye'deki gelisimi ve etkileri ozelinde incelemektedir. Bulgular onemli sonuclar ortaya koymaktadir. Oncelikle, Turkiye'deki zombi firmalarin orani COVID-19 pandemisi sonrasinda 2020'de zirveye ulastiktan sonra azalmistir. Ikinci olarak, ana bankalar mali sikinti icindeki firmalara kredi kisitlamasini daha az uygulamis ve bu zombilesmeye katkida bulunmus olabilir. Son olarak, zombi firmalar diger firmalar uzerinde olumsuz etkiye sahiptir. Bu bulgular, kaynaklarin etkin dagilimini saglamak, uretimi artirmak ve finansal istikrari korumak icin zombi kredilerin ortaya cikardigi zorluklarin ele alinmasi gerektigini vurgulamaktadir. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:econot:2410 |
| By: | Helmut Wasserbacher; Martin Spindler |
| Abstract: | Why do companies choose particular capital structures? A compelling answer to this question remains elusive despite extensive research. In this article, we use double machine learning to examine the heterogeneous causal effect of credit ratings on leverage. Taking advantage of the flexibility of random forests within the double machine learning framework, we model the relationship between variables associated with leverage and credit ratings without imposing strong assumptions about their functional form. This approach also allows for data-driven variable selection from a large set of individual company characteristics, supporting valid causal inference. We report three findings: First, credit ratings causally affect the leverage ratio. Having a rating, as opposed to having none, increases leverage by approximately 7 to 9 percentage points, or 30\% to 40\% relative to the sample mean leverage. However, this result comes with an important caveat, captured in our second finding: the effect is highly heterogeneous and varies depending on the specific rating. For AAA and AA ratings, the effect is negative, reducing leverage by about 5 percentage points. For A and BBB ratings, the effect is approximately zero. From BB ratings onwards, the effect becomes positive, exceeding 10 percentage points. Third, contrary to what the second finding might imply at first glance, the change from no effect to a positive effect does not occur abruptly at the boundary between investment and speculative grade ratings. Rather, it is gradual, taking place across the granular rating notches ("+/-") within the BBB and BB categories. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.18936 |
| By: | Miguel Faria-e-Castro; Samuel Jordan-Wood; Julian Kozlowski |
| Abstract: | We examine borrowing costs for firms using a security-level database with bank loans and corporate bonds issued by U.S. companies. We find significant within-firm dispersion in borrowing rates, even after controlling for security and firm observable characteristics. Obtaining a bank loan is 132 basis points cheaper than issuing a bond, after accounting for observable factors. Changes in borrowing costs have persistent negative impacts on firm-level outcomes, such as investment and borrowing, and these effects vary across sectors. These findings contribute to our understanding of borrowing costs and their implications for corporate policies and performance. |
| Keywords: | credit spreads; bonds; loans; macro-finance |
| JEL: | E6 G1 H0 |
| Date: | 2024–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:98542 |
| By: | Lara Coulier; Cosimo Pancaro; Alessio Reghezza (-) |
| Abstract: | We match granular supervisory and credit register data to assess the implications of banks’ exposure to interest rate risk on the monetary policy transmission to bank lending supply in the euro area. We exploit the largest and swiftest increase in interest rates since the creation of the euro and find that banks with a higher exposure to interest rate risk, i.e., with a larger duration gap after accounting for hedging, curtailed corporate lending more than their peers. Ceteris paribus, greater interest rate risk entails closer supervisory scrutiny and potential capital surcharges in the short term, and lower expected profitability and capital accumulation in the medium to long term. We then proceed to dissect banks’ credit allocation and find that banks with higher net duration reshuffled their loan portfolio away from long-term loans in an attempt to limit the increase in interest rate risk and targeted their lending contraction to small and micro firms. Firms exposed to banks with a larger exposure to interest rate risk were unable to fully rebalance their borrowing needs with other lenders, thus experiencing a relatively larger decrease in total borrowing during the monetary tightening episode. |
| Keywords: | Interest rate risk, Duration gap, Bank lending channel, Financial Stability |
| JEL: | E51 E52 G21 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:24/1091 |
| By: | Samuel Ligonnière (Bureau d'Économie Théorique et Appliquée); Salima Ouerk (National Bank of Belgium) |
| Abstract: | Is current monetary policy making the distribution of credit more unequal? Using French household-level data, we document credit volumes along the income distribution. Our analysis centers on assessing the impact of surprises in monetary policy on credit volumes at different income levels. Expansionary monetary policy surprises lead to a surge in mortgage credit exclusively for households within the top 20% income bracket. Monetary policy then does not impact mortgage credit volume for 80% of households, whereas its effect on consumer credit exists and remains consistent across the income distribution. This result is notably associated with the engagement of this particular income group in rental investments. Controlling for bank decision factors and city dynamics, we attribute these results to individual demand factors. Mechanisms related to intertemporal substitution and affordability drive the impact of monetary policy surprises. They manifest through the policy's influence on collaterals and a larger down payment. |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:boc:fsug24:08 |
| By: | Nobuhiro Abe (Bank of Japan); Naohisa Hirakata (Bank of Japan); Yuto Ishikuro (Bank of Japan); Yosuke Koike (Bank of Japan); Yuki Konaka (Bank of Japan); Yutaro Takano (Bank of Japan) |
| Abstract: | In this paper, we use a counterfactual simulation to analyze the effect on the function of financial intermediation in Japan of the decline in interest rates due to large-scale monetary easing. The results show that the decline in interest rates due to large-scale monetary easing put downward pressure on interest margins on loans and securities investments of banks. However, capital adequacy ratios were not necessarily pushed down significantly, because the decline in interest rates boosted the price of stocks and bonds and reduced credit risk. On the other hand, the improving real economy and lower lending interest rates increased demand from the corporate sector, leading to an increase in loans outstanding. In addition, the improvement in corporate finances due to an improved real economy, lower lending interest rates, and rising land and other asset prices, reduced credit risk in lending and contributed to an increase in loans outstanding. The results of the counterfactual simulation suggest that the decline in interest rates due to large-scale monetary easing contributed to the facilitation of financial intermediation. |
| Keywords: | Unconventional monetary policy; financial system |
| JEL: | E44 E59 G21 G28 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp24e08 |
| By: | María del Carmen Dircio Palacios Macedo (Department of Economics, Universitat Jaume I, Castellón, Spain); Paula Cruz-García (Department of Economic Analysis, Universitat de Valencia, Spain); Fausto Hernández-Trillo (Center for Research and Teaching in Economics (CIDE), Mexico); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | Access to financial services is unequal around the world. In many countries, les than half of the population has an account at a financial institution, and this lack of access to finance is often a critical reason behind income inequality and uneven growth. This is the case of Mexico, where financial exclusion affects large shares of the population mainly in rural and poorer localities. This is an ongoing concern for policymakers, since it undermines socioeconomic opportunities for families and businesses alike, hampering economic growth and development. However, assessing the relevance of this issue requires a careful measurement of financial inclusion which, to date, has only been achieved to a limited extent. We contribute to the literature in this context by proposing a multivariate index of financial inclusion for Mexico, at the municipal level, for the period 2013–2021. This index covers several dimensions, including access, and usage. The results corroborate that a large proportion of the population is still unbanked, although it is unevenly distributed across the country. |
| Keywords: | composite indicator, financial inclusion, Mexican municipalities, Mexico |
| JEL: | G21 G23 G30 O16 R51 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2024/06 |
| By: | Jose Aurazo; Farid Gasmi |
| Abstract: | Low financial inclusion and high labor informality are two major challenges in developing countries. Using Peruvian survey data from 2015-18, we explore the dynamic relationship between these two variables by examining how labor informality and movements between formal and informal jobs may affect the transition probabilities of financial inclusion. First, we find that becoming informally employed reduces the probability of entering the formal financial system by 8 percentage points (pp) and increases the likelihood of exiting from it by 9.3 pp. Relative to persistently informal workers, those who stay in formal jobs have a 9 pp higher probability of gaining access to bank accounts, and 12 pp lower probability of losing access. Workers who move into formal jobs are more likely to enter the formal financial system by 9.7 pp and less likely to exit from it by 7.1 pp. These results underscore the complementarity of formalizing the informal sector and expanding access to financial services. |
| Keywords: | financial inclusion, labor informality, transition probabilities, dynamic random-effect panel probit |
| JEL: | C23 D14 E26 I31 O17 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1200 |
| By: | Fisher, Jack; Gavazza, Alessandro; Liu, Lu; Ramadorai, Tarun; Tripathy, Jagdish |
| Abstract: | In household finance markets, inactive households can implicitly cross-subsidize active households who promptly respond to financial incentives. We assess the magnitude and distribution of cross-subsidies in the mortgage market. To do so, we build a structural model of household mortgage refinancing and estimate it on rich administrative data covering the stock of outstanding mortgages in the UK. We estimate sizeable cross-subsidies that flow from relatively poorer households and those located in less-wealthy areas towards richer households and those located in wealthier areas. Our work highlights how the design of household finance markets can contribute to wealth inequality. |
| Keywords: | mortages; refinancing; cross-subsidies; wealth inequality; household inaction and inertia; household finance |
| JEL: | G21 G00 N20 R21 R31 L51 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123686 |
| By: | Sergi Basco; Jair N. Ojeda-Joya |
| Abstract: | This paper empirically examines the effects of international remittances on local house prices. International remittances are one of the main drivers of capital inflows in emerging economies. We consider the salient case of Colombia. In the last two decades, remittances have represented, on average, 2% of GDP. One main advantage of studying the Colombian housing market is that we are able to construct a panel of housing returns at the project level. By exploiting the regional and temporal variation of international remittances, we document that they have large heterogeneous effects across regions and housing types. In particular, we find that remittances inflows have positive effects on house prices growth in high unemployment municipalities and low-quality housing. These results hold when considering an IV-strategy using remittances to Latin America countries (excluding Colombia). We develop a stylized model with borrowing constrained households and segmented housing markets to rationalize these results. Our findings suggest that international remittances are an important source of liquidity for credit constrained households. RESUMEN: Este artículo examina empíricamente el efecto de las remesas internacionales en los precios de la vivienda en Colombia. Las remesas internacionales son uno de los principales componentes de los ingresos de capital en economías emergentes. Consideramos el caso relevante de Colombia ya que, en las últimas dos décadas, los ingresos de remesas han representado, en promedio, el 2% del Producto Interno Bruto (PIB). Una de las principales ventajas de estudiar el mercado de vivienda colombiano es la posibilidad de construir un panel de precios de vivienda nueva al nivel de proyectos individuales. Mediante el estudio de las variaciones temporales y regionales de las remesas internacionales, documentamos que estas tienen efectos heterogéneos significativos para las diferentes regiones y tipos de vivienda. En particular, encontramos que los ingresos de remesas tienen efectos positivos en los precios de la vivienda en regiones con alto desempleo y en zonas de estrato bajo. Los resultados se mantienen cuando usamos una estrategia de estimación con variables instrumentales mediante el uso de ingresos de remesas a Latinoamérica (excluyendo a Colombia). Desarrollamos un modelo estilizado con restricciones de endeudamiento para las familias y mercados segmentados de vivienda para entender estos resultados. Estos resultados sugieren que las remesas internacionales son una fuente importante de liquidez para las familias con restricciones de endeudamiento. |
| Keywords: | House Prices, International Remittances, Borrowing Constraints, Instrumental Variables, Precios de vivienda, remesas internacionales, restricciones de endeudamiento, variables instrumentales |
| JEL: | F32 F41 F44 O15 R31 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1273 |
| By: | Shifrah Aron-Dine; Johannes Beutel; Monika Piazzesi; Martin Schneider |
| Abstract: | This paper studies green investing in a quantitative asset pricing model with heterogeneous investors calibrated using high-quality, representative survey data of German households. We find substantial heterogeneity in green taste for both safe and risky green assets throughout the wealth distribution. Model counterfactuals show nonpecuniary benefits and hedging demands currently make green equity more expensive for firms. Yet, these taste effects are dominated by optimistic expectations about green equity returns, lowering firms' cost of green equity to a greenium of 1%. Looking ahead, we use our model to trace out the aggregate effects of information provision in an RCT and find green equity investment could potentially double when information about green finance spreads across the population. Regarding safe green assets, our model counterfactuals show that if green deposits could be offered at a 50 basis point interest rate spread, aggregate green investments in the economy could quadruple in the medium run. |
| JEL: | E0 F0 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32615 |