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on Financial Development and Growth |
| By: | José Marcelo Cardoso de Lima Filho; Michel Alexandre; João Frois Caldeira |
| Abstract: | Credit supply shocks are an important channel through which financial conditions affect employ ment dynamics within firms. This paper examines whether contractions in credit supply primar ily reduce employment levels or also alter workforce composition across workers with different skill levels, and whether these effects depend on firms’ financial leverage. Using matched em ployer–employee administrative data combined with credit registry information and firm-level balance sheet data, we construct plausibly exogenous measures of credit supply shocks based on bank-level variation in lending conditions between 2013 and 2022. The results show that adverse credit shocks reduce employment among both high- and low-skilled workers, with stronger effects on high-skilled employment in more leveraged firms during the 2013–2016 recession. By con trast, employment adjustments among low-skilled workers are more pronounced in less leveraged f irms during the recovery period. Overall, the findings indicate that credit shocks affect not only employment levels but also workforce composition, highlighting the moderating role of firms’ capital structure. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:648 |
| By: | Sánchez Serrano, Antonio |
| Abstract: | Using who-to-whom data for the last quarter of 2024, I build networks of financial interconnections in the euro area countries. After representing them in chord diagrams, I consider centrality metrics and find that banks dominate, with four exceptions: Cyprus, Ireland, Luxembourg and Malta. In these countries, other financial institutions and investment funds are at the core, with limited links to domestic sectors and strong ones with the rest of the world. A comparison across countries reveals substantial homogeneity between networks in the sixteen euro area countries and large differences with Cyprus, Ireland, Luxembourg and Malta. For each country, two communities are identified, one focused on the real economy and including banks, and the second comprising other financial intermediaries and the rest of the world. The consistent mapping of sectoral linkages and the accompanying descriptive analysis can be useful for policymakers and may also serve as platform for further analytical work. JEL Classification: D85, G10, G20, G51 |
| Keywords: | centrality, contagion, financial interlinkages, flow of funds |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263223 |
| By: | Nicola Cortinovis; ; |
| Abstract: | Crowdfunding (CF) has emerged as a novel source of entrepreneurial finance, yet its role in shaping regional industrial dynamics remains poorly understood. Adopting an evolutionary economic geography perspective and exploiting a newly developed database, this paper examines the relationship between crowdfunding activity and the emergence of new local industrial specializations. The analysis shows that industries receiving funds through CF are more likely to become part of local specialization patterns, especially when they are related to the existing industrial structure. Moreover, these associations are stronger in counties characterized by higher levels of credit insecurity. |
| Keywords: | Crowdfunding, industrial diversification, relatedness, credit insecurity, US |
| JEL: | O14 O31 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2607 |
| By: | Compano Ramon (European Commission - JRC); Johanyak Csaba; Testa Giuseppina; Zhen Ni; Testa Giuseppina; Tuebke Alexander (European Commission - JRC) |
| Abstract: | This paper examines whether, and under which conditions, regional entrepreneurial ecosystems mitigate spatial frictions in cross-regional venture capital (VC) investments. Using a dyadic panel of VC flows across 267 European NUTS-2 regions over 2008-2022, we estimate gravity-style regressions with high-dimensional fixed effects, distinguishing investments by stage and investor origin. Our results show that spatial frictions, particularly geographic and economic distance, remain important determinants of VC allocation. At the same time, regions with stronger entrepreneurial ecosystems attract higher VC inflows and exhibit lower sensitivity to institutional and structural differences. Differences across investor origins suggest that ecosystem legibility is most valuable when institutional uncertainty is high, such as for cross-border investors. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:wpaper:202601 |
| By: | Errico, Marco (IMF); Pesce, Simone (Central Bank of Ireland); Pollio, Luigi (UMBC) |
| Abstract: | We study how firm heterogeneity shapes the transmission of aggregate shocks. The aggregate response of macroeconomic outcomes to any source of aggregate shocks depends on both the average response across firms and the covariance between firms’ response and their economic weight, which determines whether heterogeneity amplifies or dampens fluctuations. Using U.S. Compustat data from 1990 to 2019 and the Generalized Random Forest estimator, we estimate firm-level responses of sales, investment, and debt issuance to business cycle fluctuations. We uncover substantial heterogeneity driven primarily by non-financial characteristics— particularly industry scope and firm size. Aggregating these responses reveals that firm heterogeneity dampens aggregate fluctuations, especially for investment and debt issuance, as larger firms tend to be less cyclical than the average firm. Our results carry over to exogenously identified shocks and to financial outcomes. |
| Keywords: | Firm Heterogeneity, Firm Sensitivity, Aggregate Fluctuations, Machine Learning. |
| JEL: | D22 E32 C14 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:06/rt/26 |
| By: | Alexandre Dmitriev; Qiaoxian He |
| Abstract: | Habit formation defined over a composite measure of consumption and leisure helps align predicted asset pricing and business cycle moments with their observed counterparts. We employ Bayesian maximum-likelihood techniques to assess the empirical significance of generalized composite habits within a production-based asset pricing model. Using U.S. quarterly data on output, consumption, investment, and hours worked, our findings indicate a very high level of habit intensity and a moderate degree of habit persistence, although the data are less informative regarding the latter. Overall, the estimated model successfully matches the observed equity premium and key business cycle moments. |
| Keywords: | Composite Habits; Asset Prices; Business Cycles; Bayesian Estimation |
| JEL: | C11 E32 G12 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cyc:wpaper:024 |
| By: | Simone Alfarano (Universitat Jaume I); Omar Blanco-Arroyo (Universitat de València) |
| Abstract: | We study how rising concentration in the U.S. stock market affects the transmis- sion of firm-level risk to aggregate volatility. Using a variance decomposition that separates common and granular components of market returns, we document a shift in the composition of idiosyncratic risk since the mid-2010s. Whereas idiosyncratic volatility previously reflected cross-firm comovement, it is now increasingly driven by the weighted variances of a small number of large firms. We show that this change is not explained by concentration alone, but by a reallocation of idiosyncratic risk toward dominant firms. As a result, aggregate volatility becomes more sensitive to firm-specific shocks at the top of the size distribution. |
| Keywords: | granularity; market concentration; idiosyncratic volatility; firm size distribution; aggregate volatility |
| JEL: | G12 G14 E44 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:eec:wpaper:2608 |
| By: | Benjamin Knox; Annette Vissing-Jorgensen |
| Abstract: | We survey and extend work on the Federal Reserve’s effect on the stock market, focusing on three empirical findings: The effect of monetary policy surprises in a narrow window around announcements from the Federal Open Market Committee (FOMC), the pre-FOMC announcement drift, and the FOMC cycle in stock returns. We discuss the magnitude of the Fed’s impact (directional effects or effects on average stock returns), the types of shocks coming from the Fed (pure monetary policy shocks, reaction function news, or information about the Fed’s view of the economy), and the asset pricing channels through which effects emerge (an equity premia for news from the Fed, or changes to yields, equity premia, or expected dividends). We also consider the information transmission (communication) channels. The Fed’s effect on the stock market is large, even for average stock returns earned over periods of several decades. Fed-induced changes to both yields and equity premia play substantial roles, with less direct evidence available regarding cash flows. For stocks, reaction function news appears to be more important than Fed information effects. Communication flows outside announcements windows are important. |
| Keywords: | asset pricing; monetary policy transmission; Federal Open Market Committee (FOMC); monetary policy communication; risk premiums |
| JEL: | E52 G10 G12 |
| Date: | 2026–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103197 |
| By: | J. Scott Davis; Brendan Kelly |
| Abstract: | China’s private sector debt ballooned from 2008 through 2016, among the largest and most sustained such increases historically. Notably, this Chinese credit growth was financed entirely from domestic savings, unlike many other examples of rapid credit expansion elsewhere. |
| Keywords: | China; credit; debt |
| Date: | 2025–12–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:102285 |
| By: | Vishal Vaibhav |
| Abstract: | I examine whether firms borrowing exclusively from government-owned banks respond differently to SARFAESI Act and how it affects the investment efficiency. I find that firms borrowing exclusively from government-owned banks experience a significant increase in investment inefficiency following the reform. I also find the increase in inefficiency is concentrated among firms with high levels of tangible assets, suggesting that collateral enforcement is the primary mechanism driving the results |
| Date: | 2025–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:iim:iimawp:14730 |
| By: | Viral V. Acharya; Nicola Cetorelli; Bruce Tuckman |
| Abstract: | Do the recent stresses in the NBFI space—notably the bankruptcies of Tricolor and First Brands, and the decision of Blue Owl Capital Corp II (OBDC II) to end its redemption program and return capital through a wind-down of the fund—create distress for banks? The general sentiment is that the recent stresses are unlikely to amount to systemic concerns, although it does not mean there might not be “some stress and strain” for banks and that policymakers are “watching carefully” for exposure across banks. In a series of previous posts, we showed that shocks to nonbank financial institutions (NBFIs) directly impact banks that have exposures to NBFIs. In this post, we show that bank stocks have been directly impacted by NBFIs yet again. In short, NBFI troubles do result in “stress and strain” for banks. |
| Keywords: | NBFIs; banks; private credit |
| JEL: | G21 G23 |
| Date: | 2026–05–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:103181 |
| By: | Meri Papavangjeli (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Joint Vienna Institute); Lorena Skufi (Bank of Albania & Metropolitan University of Tirana); Adam Gersl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This study investigates the relationship between lending standards and credit dynamics in Albania. Using a unique bank-level dataset from the Bank Lending Standards Survey, we differentiate between newly issued domestic-currency and foreign-currency loans to non-financial corporations. We construct a quantitative index of lending standards using detailed bank-level and macro-financial data. The analysis reveals that tightening internal credit criteria, driven by macroeconomic uncertainty, regulatory constraints, or risk aversion, significantly reduces new business lending, weakening bank–firm relationships. In addition, we assess the role of monetary and macroprudential policies, finding that policy changes affect domestic-currency and foreign-currency credit differently, amplifying the impact of supply-side tightening. Firms face limited ability to offset these constraints through alternative lenders, reflecting low substitutability in the Albanian credit market. The effects of tightening are persistent and intensify during economic stress, yielding important implications for monetary transmission, macroprudential policy effectiveness, financial stability, and crisis resilience in small, bank-based economies. |
| Keywords: | Corporate credit growth; lending standards; credit supply shocks; bank lending behavior; firm financing |
| JEL: | E44 G21 G32 C33 E51 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_05 |
| By: | International Monetary Fund |
| Abstract: | The FSAP takes place as the economy shows signs of recovery, but lingering concerns remain over liquidity pressures, given the fragile fiscal position and looming sizable external debt service. Angola’s oil-dependent economy recovered in 2024; yet sovereign and private financing conditions remained tight. The bank-dominated financial sector is small and appears adequately capitalized on average, but certain vulnerabilities persist, including high non-performing loans, a substantial sovereign-bank nexus, and exposure to foreign exchange and climate-related financial risks. Liquidity indicators are high, with the bulk of banks’ funding coming from residents’ deposits. |
| Date: | 2026–05–08 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfscr:2026/096 |
| By: | Bernhard Reinsberg |
| Abstract: | Since the Global Financial Crisis, money has been undergoing transformational changes. Cryptocurrencies like Bitcoin and the lesser-known stablecoins, powered by blockchain technology, have grown rapidly, allowing people to undertake financial transactions globally without central intermediaries. In addition, many countries have explored central bank digital currencies, which are digital representations of fiat monies controlled by national central banks. While descriptive studies on these money innovations abound, systematic analysis of their drivers is lacking. This paper offers the first systematic analysis of the conditions under which societies adopt these money innovations. Based on an original cross-country dataset capturing the extent to which money innovations have been deployed, regression analysis shows limited overlap in the significant drivers of these money innovations, aside from fundamental country characteristics including level of development, population size, and (to a lesser extent) regime type. Cryptocurrency use appears to be driven by macro-financial instability and lack of access to bank finance. In contrast, CBDC adoption by states appears to be driven by exposure to sanctions and previous experimentation with CBDC projects. While confirming the role of financial inclusion for cryptocurrency adoption, the findings partly challenge the official discourse of financial inclusion as a key motivation for CBDC adoption. |
| Keywords: | Digital money, cryptocurrency, central bank digital currency (CBDC), money innovations, cross-country analysis |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbr:cbrwps:wpt202601 |
| By: | Samuel J. Hempel; JP Perez-Sangimino; Jessie Jiaxu Wang |
| Abstract: | The expansion of stablecoins has moved digital payment tokens from the periphery of financial markets to the center of policy discussions. With a global market capitalization in the mid-hundreds of billions of dollars and annual settlement volumes in the trillions as of 2025, stablecoins are increasingly viewed not merely as crypto‐market infrastructure but as potential competitors to traditional transaction accounts, particularly in payment processing, settlement functionality, and as short-term stores of value for transaction balances. |
| Date: | 2026–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:103193 |
| By: | Anand, Kartik; Leonello, Agnese; Panetti, Ettore; Kazinnik, Sophia |
| Abstract: | Does artificial intelligence (AI) pose a threat to financial stability? We study AI investor behavior, specifically Q-learning and large language model (LLM) investors, in a mutual fund redemption problem with economic and strategic uncertainty. Different AI architectures generate systematically different outcomes. Q-learning investors coordinate well but under default risk exhibit excessive redemption that amplifies fragility. LLM investors internalize equilibrium structure but display belief heterogeneity, weakening coordination and predictability. Our findings show that AI architecture is a first-order determinant of financial stability. JEL Classification: G01, G23, C63 |
| Keywords: | AI agents, coordination games, financial stability, large language models, Q-learning, strategic uncertainty |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263225 |