Results

CEP discussion paper

The equilibrium impact of credit frictions: evidence from default risk using firm-level data

This paper examines the impact of credit frictions arising from firm-level default risk on aggregate economic performance. We build a micro-to-macro model with heterogeneous firms and sector-specific production functions...Read more...

Journal article

Journal of International Economics:

How to grow an invoicing currency: micro evidence from Argentina

We study the internationalization of the Chinese renminbi (RMB) leveraging a unique policy experiment. In 2023, amid a dollar shortage, Argentina expanded a currency swap line with China. The share of imports from China ...Read more...

CEP discussion paper

Growth insured: export credit insurance and trade

We estimate the causal effect of short-term export credit insurance (ECI) on firm-level exports using administrative data from China?s export credit agency merged with customs and tax records. Exploiting quasi-random var...Read more...

Journal article

Journal of International Economics:

Liquidity as competitive advantage: the role of intangibles

We show that short-term liquidity can be a source of competitive advantage by enabling firms to invest in intangible assets. Our analysis leverages a French reform that capped payment delays in trade credit contracts, wh...Read more...

CEP discussion paper

How to grow an invoicing currency: micro evidence from Argentina

How can a currency achieve more widespread international use? We study the internationalization of the Chinese renminbi (RMB) through the lens of a unique policy experiment in Argentina. In 2023, amid a severe dollar sho...Read more...

Blog

Financial Times:

How should central banks respond to US tariffs? (Podcast)

US tariffs have sent financial markets into a frenzy in recent weeks, but how much should central bankers be taking trade into account when setting monetary policy? To find out, Soumaya Keynes sits down with Bank of Engl...Read more...

CEP discussion paper

Firm dynamics and growth with soft budget constraints

We develop a model of endogenous growth and firm dynamics with soft budget constraints, where firms differ in their innovation speed and slower firms need additional financing in order to eventually innovate. As creditor...Read more...

Blog

Bank Underground:

Forbearance lending as a crisis management tool

The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Prudential Architecture Theme which focuses on ...Read more...

Blog

The Rest is Money (podcast):

Bank of England Economist: Interest rates must be cut (podcast)

Economist and external member of the Bank of England's Monetary Policy Committee, Swati Dhingra talks to Robert and Steph about why she thinks the time has come to lower Bank Rate, the interest rate set by the Bank of En...Read more...

Journal article

Management Science :

Managerial and financial barriers to the green transition

Using data on 10,776 firms across 22 emerging markets, we show that both credit constraints and weak green management hold back corporate investment in green technologies embodied in new machinery, equipment, and vehicle...Read more...

Journal article

Journal of Urban Economics:

On the economic impacts of mortgage credit expansion policies: evidence from help to buy

We take advantage of two spatial discontinuities in Britain's Help to Buy (HtB) scheme to explore the effectiveness and distributional implications of mortgage credit expansion policies. Employing a Difference-in-Discont...Read more...

Government consultation

Bank of England Monetary Policy Reports

The Bank of England publishes a Monetary Policy Report four times a year. After publication, the Treasury Committee holds sessions with the Governor of the Bank of England and members of the Monetary Policy Committee to ...Read more...

CEP discussion paper

Strapped for cash: the role of financial constraints for innovating firms

This paper makes use of a reform that allowed firms to use patents as stand-alone collateral, to estimate the magnitude of collateral constraints and to quantify the aggregate impact of these constraints on misallocation...Read more...

CEP discussion paper

Import competition, trade credit and financial frictions in general equilibrium

We analyze the role of trade credit and financial frictions in the propagation of international trade shocks along the supply chain. First, we show empirically that exposure to import competition from China increased the...Read more...

Chapter

Firms and finance during the green transition

in Scaling up sustainable finance and investment in the global south

Creating economically and politically legitimate solutions to tackle climate change is one of the most pressing and challenging issues of our time. For emerging and developing economies, the task is made more difficult d...Read more...

Journal article

Economic Modelling:

Credit constraints, selection and productivity growth

This paper presents a tractable model of innovation and growth with firm heterogeneity and financial frictions. The model is used to uncover new mechanisms linking access to credit and productivity growth, highlighting t...Read more...

CEP discussion paper

Managerial and financial barriers during the green transition

Using data on 10,769 firms across 22 emerging markets, we show that both credit constraints and weak green management hold back corporate investment in green technologies embodied in new machinery, equipment and vehicles...Read more...

Blog

LSE Business Review:

Will the US child tax credit reduce poverty and improve outcomes for children and parents?

The American Rescue Plan Act of 2021 temporarily increased the value of the child tax credit from $2,000 to $3,000 for children aged 6-16 and to $3,600 for younger children. To date, the Biden administration has been una...Read more...

Journal article

Journal of Political Economy:

Are bigger banks better? Firm-level evidence from Germany

The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in postwar Germany. I show that firms did not grow faster after ...Read more...

Journal article

European Economic Review:

Global banking: endogenous competition and risk taking

When banks expand abroad, their riskiness decreases if foreign expansion happens in destination countries that are more competitive than their origin countries. We reach this conclusion in three steps. First, we develop ...Read more...

CEP discussion paper

Are bigger banks better? Firm-level evidence from Germany

The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in post-war Germany. I show that firms did not grow faster after...Read more...

CEP industrial strategy paper

Has the Financial Crisis Undermined Credit Reallocation in the United Kingdom?

The global financial crisis and its aftermath heightened awareness of the role of credit frictions in affecting aggregate economic performance. An important question is whether capital is being allocated to its most prod...Read more...

CEP discussion paper

The aggregate consequences of default risk: evidence from firm-level data

This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm?s probability of default is a sufficient stati...Read more...

CEP discussion paper

Trade shocks and credit reallocation

The effect of trade liberalization on welfare and economic activity remains one of the most important questions in economics. The literature identifies a number of key determinants that reduce the potential gains from tr...Read more...

Journal article

European Economic Review:

Host-country financial development and multinational activity

This paper evaluates the influence of host-country financial conditions on the global operations of multinational firms. Using detailed U.S. data, we establish that financial development in a country is associated with r...Read more...

CEP discussion paper

The inverted-U relationship between credit access and productivity growth

In this paper we identify two counteracting effects of credit access on productivity growth: on the one hand, better access to credit makes it easier for entrepreneurs to innovate; on the other hand, better credit access...Read more...

Journal article

Journal of Housing Economics:

Housing in Europe: a different continent ? a continent of differences

This article provides the introduction to the special issue on `Housing in Europe: a different continent ? a continent of differences? in the Journal of Housing Economics in 2018. Europe is a large continent with a long ...Read more...

Journal article

International Economics:

Relaxing credit constraints in emerging economies: the impact of public loans on the productivity of Brazilian manufacturers

In emerging economies credit constraints are often perceived as one of the most important market frictions hampering firm productivity growth in manufacturing. Huge amount of public money is devoted to the removal of suc...Read more...

CEP discussion paper

Financial markets and the allocation of capital: the role of productivity

The efficient allocation of credit is a key element for the success of an economy. Traditional measures of allocative efficiency focus on the Q-theory of investment and, in particular, on the elasticity of finance to inv...Read more...

Journal article

Research Policy:

The long-term effect of digital innovation on bank performance: an empirical study of SWIFT adoption in financial services

We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure and set of standards for worldwide interbank telecommunication. We construct a new longitudinal dataset of ...Read more...

CEP discussion paper

Global banking: risk taking and competition

Direct involvement of global banks in local retail activities can reduce risk-taking by promoting local competition. We develop this argument through a model in which multinational banks operate simultaneously in differe...Read more...

Journal article

The Review of Economics and Statistics:

Survive another day: using changes in the composition of investments to measure the cost of credit constraints

We introduce a novel empirical strategy to measure the size of credit shocks. Theoretically, we show that credit shocks reduce the value of long-term relative to short-term investments. Empirically, we can therefore comp...Read more...

Journal article

Journal of International Economics:

How firms export: processing vs. ordinary trade with financial frictions

The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial fr...Read more...

CEP discussion paper

How firms export: processing vs. ordinary trade with financial frictions

The fragmentation of production across borders allows firms to make and export final goods, or to perform only intermediate stages of production by processing imported inputs for re-exporting. We examine how financial fr...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Credit Constraints and the Composition of Housing Sales. Farewell to First-Time Buyers?

During the housing bust of 2008?2009, home prices and transaction volumes fell across the entire United Kingdom. However, while the fall in prices was similar across housing types, transaction volumes fell more for homes...Read more...

Journal article

The World Bank Economic Review:

The political economy of trade policy: gone for good? Subsidies with export share requirements in China: 2002-13

This paper presents a simple model of subsidies with export share requirements (ESR) in a heterogeneous firm environment. A two-country general equilibrium version of the model with a single 100% ESR is calibrated using ...Read more...

CEP discussion paper

Relaxing credit constraints in emerging economies: the impact of public loans on the performance of Brazilian manufacturers

n emerging economies credit constraints are often perceived as one of the most important market frictions hampering firm innovation and productivity growth in manufacturing. Huge amounts of public money are devoted to th...Read more...

CEP discussion paper

Survive Another Day: Using Changes in the Composition of Investments to Measure the Cost of Credit Constraints

We introduce a novel empirical strategy to measure credit shocks. Theoretically, we show that credit shocks reduce the value of long term investments relative to short term ones. Under the (conservative) assumption that ...Read more...

SERC/Urban and Spatial Programme Discussion Paper

The Causal Effect of Credit Guarantees for SMEs: Evidence from Italy

We evaluate the effectiveness of a partial credit guarantee program implemented in a large Italian region using unique microdata from a broad set of firms. Our results show that the policy was effective to the extent tha...Read more...

CEP discussion paper

Exporters, Importers and Credit Constraints

This paper analyses the interaction between credit constraints and trading behaviour. I construct a unique dataset containing firm-level trade transactions data, balance sheets and credit scores from an independent credi...Read more...

SERC/Urban and Spatial Programme Discussion Paper

House Prices and Credit Constraints: Making Sense of the U.S. Experience

Most US house price models break down in the mid-2000's, due to the omission of exogenous changes in mortgage credit supply (associated with the sub-prime mortgage boom) from house price-to-rent ratio and inverted housin...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Shifting Credit Standards and the Boom and Bust in U.S. House Prices

The U.S. house price boom has been linked to an unsustainable easing of mortgage credit standards. However, standard time series models of US house prices omit credit constraints and perform poorly in the 2000?s. We inco...Read more...

CEP discussion paper

Communal Responsibility and the Coexistence of Money and Credit Under Anonymous Matching

Communal responsibility, a medieval institution studied by Greif (2006), supported the use of credit among European merchants in the absence of modern enforcement technologies. This paper shows how this mechanism helps t...Read more...

CentrePiece article

In brief... The future of finance

A new CEP report says that the financial system has become far more complicated than it need to be - and dangerously unstable too...Read more...

CEP discussion paper

Adjusting to Capital Account Liberalization

We study theoretically how the adjustment to liberalization of international financial transaction depends upon the degree of domestic financial development. Using a model with domestic and international borrowing constr...Read more...

CEP discussion paper

The long-term effect of digital innovation on bank performance: an empirical study of SWIFT adoption in financial services

We examine the impact on bank performance of the adoption of SWIFT, a network-based technological infrastructure for worldwide interbank telecommunication. We construct a new longitudinal dataset of 6,848 banks in 29 cou...Read more...

SERC/Urban and Spatial Programme Discussion Paper

Housing Markets and the Financial Crisis of 2007-2009: Lessons for the Future

An unsustainable weakening of credit standards induced a US mortgage and housing bubble whose consumption impact was amplified by innovations altering the collateral role of housing. In countries with more stable credit ...Read more...

CEP election analysis

Financial Regulation: Can We Avoid Another Great Recession?

Read more...

CEP election analysis

Bankers' Bonuses

Read more...

CEP discussion paper

Central Bank's Two-Way Communication with the Public and Inflation Dynamics

Using a model of island economy where financial markets aggregate dispersed information of the public, we analyze how two-way communication between the central bank and the public affects inflation dynamics. When inflati...Read more...

CEP discussion paper

Delayed Doves: MPC Voting Behaviour of Externals

The use of independent committees for the setting of interest rates, such as the Monetary Policy Committee (MPC) at the Bank of England, is quickly becoming the norm in developed economies. In this paper we examine the i...Read more...

CEP discussion paper

Talking Less and Moving the Market More: Is this the Recipe for Monetary Policy Effectiveness? Evidence from the ECB and the Fed

This paper examines and compares the communication strategies of the Federal Reserve and the European Central Bank, and their effectiveness. First we do a comparative study exercise. We find that on monetary policy commi...Read more...

CEP discussion paper

Does the Underground Economy Hold Back Financial Deepening? Evidence from the Italian Credit Market

The paper investigates the relationship between underground activities and financial deepening. The access to external finance requires entrepreneurs to disclose credible information through formal documentation. This re...Read more...

CEP discussion paper

Seigniorage

In this paper I analyse four different but related concepts, each of which highlights some aspect of the way in which the state acquires command over real resources through its ability to issue fiat money. They are (1) s...Read more...

CEP discussion paper

The Impact of Central Bank Announcements on Asset Prices in Real Time: Testing the Efficiency of the Euribor Futures Market

This paper examines the effect of European Central Bank communication on the price discovery process in the Euribor futures market using a new tick-by-tick dataset. First, we show that two pieces of news systematically h...Read more...

CEP discussion paper

Measuring the Cost Effectiveness of an R&D Tax Credit for the UK

This paper investigates the economic impact of the government's proposed new UK R&D tax credit. We measure the benefit of the credit by the effect on value added in the short and long?run. This is simulated from existin...Read more...