Publications
36 results found
Andersen A, Jørgensen M, Johannesen N, et al., 2023, Monetary policy and inequality, The Journal of Finance, Vol: 78, Pages: 2945-2989, ISSN: 0022-1082
We analyze the distributional effects of monetary policy on income, wealth, and consumption. We use administrative household-level data covering the entire population in Denmark over the period 1987 to 2014 and exploit a long-standing currency peg as a source of exogenous variation in monetary policy. We find that gains from softer monetary policy in terms of income, wealth, and consumption are monotonically increasing in ex ante income. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially nonlabor channels (e.g., leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality.
Peydro J-L, Rodriguez Tous F, Tripathy J, et al., 2023, Macroprudential policy, mortgage cycles and distributional effects: evidence from the United Kingdom, The Review of Financial Studies, ISSN: 0893-9454
We analyze the distributional effects of macroprudential policy on mortgage cycles by exploiting the U.K. mortgage register and a 2014 15% limit imposed on lenders’ high loan-to-income (LTI) mortgages. Constrained lenders issue fewer and more expensive high-LTI mortgages, with stronger effects on low-income borrowers. Unconstrained lenders strongly substitute high-LTI loans in local areas with higher constrained lender presence, but not high-LTI loans to low-income borrowers—consistent with adverse selection problems—implying lower overall credit to low-income borrowers. Consistently, policy-affected areas experience lower house price growth postregulation and, following the Brexit referendum (negative aggregate shock), better house price growth and lower mortgage defaults for low-income borrowers.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online
Peydro J-L, Rodriguez-Tous F, Tripathy J, et al., 2023, Macroprudential Policy, Mortgage Cycles, and Distributional Effects: Evidence from the United Kingdom, REVIEW OF FINANCIAL STUDIES, ISSN: 0893-9454
Abbassi P, Iyer R, Peydro JL, et al., 2023, Stressed banks? Evidence from the largest-ever supervisory review, Management Science, ISSN: 0025-1909
We study short-term and medium-term changes in bank risk-taking as a result of supervision, and theassociated real effects. For identification, we exploit the European Central Bank’s asset-qualityreview (AQR) in conjunction with security and credit registers. After the AQR announcement,reviewed banks reduce riskier securities and credit supply, with the greatest effect on riskiestsecurities. We find negative spillovers on asset prices and firm-level credit availability. Moreover,non-banks with higher exposure to reviewed banks acquire the shed risk. After the AQR compliance,reviewed banks reload riskier securities but not riskier credit, resulting in negative medium-termfirm-level real effects. These effects are especially strong for firms with high ex-ante credit risk.Among these non-safe firms, even those with high ex-ante productivity experience negative realeffects. Our findings suggest that banks’ liquid assets help them to mask risk from supervisors andrisk adjustments banks make in response to supervision have persistent corporate real effects.
Jasova M, Laeven LA, Mendicino C, et al., 2023, Systemic risk and monetary policy: the haircut gap channel of the lender of last resort, The Review of Financial Studies, ISSN: 0893-9454
We show that lender of the last resort (LOLR) policy contributes to higher bank interconnectedness and systemic risk. Using novel micro-level data, we analyze the haircut gap channel of LOLR – the difference between the private market and central bank haircuts. LOLR increases interconnectedness by incentivizing banks to pledge higher haircut gap bonds, especially issued by similar banks and by systemically important banks. LOLR also exacerbates cross-pledging of bank bonds. Higher haircut gaps only incentivize banks, not other intermediaries without LOLR access, to increase bank bond holdings. Finally, LOLR revives bank bond issuance associated with higher haircut gaps.
Epure M, Mihai I, Minoiu C, et al., 2023, Household credit, global financial cycle, and macroprudential policies: credit register evidence from an emerging country, Management Science, ISSN: 0025-1909
We analyze the effects of macroprudential policies on local bank credit cycles and interactions with international financial conditions. For identification, we exploit the comprehensive credit register containing all bank loans to individuals in Romania, a small open economy subject to external shocks, and the period 2004-2012, which covers a full boom-bust credit cycle when a wide range of macroprudential measures were deployed. Although household leverage is known to be a key driver of financial crises, to our knowledge this is the first paper that employs a household credit register to study leverage and macroprudential policies over a full economic cycle. Our results show that tighter macroprudential conditions are associated with a significant decline in household credit, with substantially stronger effects for foreign currency (FX) loans than for local currency loans. The effects on FX loans are higher for: (i) ex-ante riskier borrowers proxied by higher debt-service-toincome ratios and (ii) banks with greater exposure to foreign funding. Moreover, tighter macroprudential policy has stronger dampening effects on FX lending when global risk appetite is high and foreign monetary policy is expansionary. Finally, quantitative effects are in general larger for borrower rather than lender macroprudential policies.
Peydro J-L, Voth J, Doerr S, et al., 2022, Financial crises and political radicalization: how failing banks paved Hitler’s path to power, The Journal of Finance, Vol: 77, Pages: 3339-3372, ISSN: 0022-1082
Do financial crises radicalize voters? We study Germany’s 1931 banking crisis, collecting new data on bank branches and firm-bank connections. Exploiting cross-sectional variation in pre-crisis exposure tothe bank at the center of the crisis, we show that Nazi votes surgedin locations more affected by its failure. Radicalization in response tothe shock was exacerbated in cities with a history of anti-Semitism.After the Nazis seized power, both pogroms and deportations weremore frequent in places affected by the banking crisis. Our resultssuggest an important synergy between financial distress and culturalpredispositions, with far-reaching consequences.
Fabiani A, Pineros ML, Peydro J-L, et al., 2022, Capital controls, domestic macroprudential policy and the bank lending channel of monetary policy, Journal of International Economics, Vol: 139, Pages: 1-32, ISSN: 0022-1996
We study how capital controls and domestic macroprudential policy tame credit supply booms, either directly or by enhancing the local bank-lending channel of monetary policy. We exploit credit registry data and the introduction of capital controls on foreign exchange (FX) debt inflows and increase of reserve requirements on domestic bank deposits in Colombia during a boom. We find that capital controls strengthen the bank-lending channel. Increasing the local monetary policy rate widens the interest rate differential with the U.S.; hence, relatively more FX-indebted banks carry-trade cheap FX-funds with expensive peso lending, especially towards riskier firms. Capital controls tax FX-debt and break the carry-trade. Differently, raising reserve requirements on domestic deposits directly reduces credit supply, particularly for riskier firms, rather than enhancing the bank-lending channel. Importantly, banks differentially finance credit with domestic vis-à-vis FX-financing; hence, capital controls and domestic macroprudential policy complementarily mitigate the credit boom and related bank risk-taking.
Bottero M, Minoiu C, Peydró J-L, et al., 2022, Expansionary yet different: credit supply and real effects of negative interest rate policy, Journal of Financial Economics, Vol: 146, Pages: 754-778, ISSN: 0304-405X
We show that negative interest rate policy (NIRP) has expansionary effects on credit supply through a portfolio rebalancing channel. By shifting down and flattening the yield curve, NIRP differs from rate cuts just above the zero-lower-bound and has effects similar to QE. For identification, we exploit ECB’s NIRP and the Italian credit register and, for external validity, European and U.S. datasets. NIRP affects more banks with higher ex-ante liquid assets, including net interbank positions. More exposed banks reduce liquid assets, expand credit supply, especially to financially-constrained firms, and cut loan rates, inducing firms to increase investment and the wage bill.
Abbassi P, Braeuning F, Fecht F, et al., 2022, Cross-border interbank liquidity, crises, and monetary policy, JOURNAL OF INTERNATIONAL ECONOMICS, Vol: 139, ISSN: 0022-1996
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- Citations: 1
Peydro J-L, Polo A, Sette E, 2021, Monetary policy at work: Security and credit application registers evidence, Journal of Financial Economics, Vol: 140, Pages: 789-814, ISSN: 0304-405X
Monetary policy transmission may be impaired if banks rebalance their portfolios toward securities. We identify the bank lending and risk-taking channels of monetary policy by exploiting—Italy's unique—credit and security registers. In crisis times, with higher central bank liquidity, less capitalized banks react by increasing securities over credit supply, inducing worse firm-level real effects. However, they buy securities with lower yields and haircuts. Unlike in crisis times, in precrisis times, securities do not crowd out credit supply. The substitution from lending to securities in crisis times helps less capitalized banks repair their balance sheets and restart credit supply with a one-year lag.
Iyer R, Irani R, Peydro J, et al., 2021, The rise of shadow banking: evidence from capital regulation, The Review of Financial Studies, Vol: 34, Pages: 2181-2235, ISSN: 0893-9454
We investigate the connections between bank capital regulation and the prevalence of lightly regulated nonbanks (shadow banks) in the U.S. corporate loan market. For identification, we exploit a supervisory credit register of syndicated loans, loan-time fixed effects, and shocks to capital requirements arising from surprise features of the U.S. implementation of Basel III. We find that less-capitalized banks reduce loan retention, particularly among loans with higher capital requirements and at times when capital is scarce, and nonbanks step in. This reallocation {is associated with} important adverse effects during the 2008 crisis: loans funded by nonbanks with fragile liabilities are less likely to be rolled over and experience greater price volatility.
Akin O, Marin JM, Peydro J-L, 2021, Anticipating the financial crisis: evidence from insider trading in banks, Economic Policy, Vol: 35, Pages: 213-267, ISSN: 1468-0327
Banking crises are recurrent phenomena, often induced by excessive bank risk-taking, which may be due to behavioural reasons (over-optimistic banks neglecting risks) and to conflicts of interest between bank shareholders/managers and debtholders/taxpayers (banks exploiting moral hazard). We test whether US banks’ stock returns in the 2007–8 financial crisis are associated with bank insiders’ sales of their own bank’s shares in the period prior to 2006Q2 (the peak and reversal in real estate prices). We find that top-five executives’ sales of shares predict bank performance during the crisis. Interestingly, effects are insignificant for the sales of independent directors and other officers. Moreover, the top-five executives’ impact is stronger for banks with higher exposure to the real estate bubble, where a one standard deviation increase of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. Finally, even though bankers in riskier banks sold more shares (furthering their own interests), they did not change their bank’s policies, for example, by reducing bank-level exposure to real estate. The informational content of bank insider trading before the crisis suggests that insiders knew that their banks were taking excessive risks, which has important implications for theory, public policy and the understanding of crises, as well as a supervisory tool for early warning signals.
Jimenez G, Mian A, Peydro J-L, et al., 2020, The real effects of the bank lending channel, Journal of Monetary Economics, Vol: 115, Pages: 162-179, ISSN: 0304-3932
This paper studies credit booms exploiting the Spanish matched credit register over 2001–2009. We extend Khwaja and Mian’s (2008) loan-level estimator by incorporating firm-level general equilibrium adjustments. Higher ex-ante bank real-estate exposure increases credit supply to non-real-estate firms, but effects are neutralized by firm-level adjustments for firms with existing banking relationships. However, higher bank real-estate exposure increases risk-taking, by relaxing standards of existing borrowers (cheaper, longer-term and less collateralized credit), and by expanding credit on the extensive margin to first-time borrowers that default substantially more. Results suggest that the mechanism at work is greater liquidity via securitization of real-estate assets.
Bubeck J, Maddaloni A, Peydro J-L, 2020, Negative monetary policy rates and systemic banks' risk-taking: evidence from the Euro area securities register, Journal of Money, Credit and Banking, Vol: 52, Pages: 197-231, ISSN: 0022-2879
We show that negative monetary policy rates induce systemic banks to reach-for-yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private-sector (financial and nonfinancial) securities and dollar-denominated securities. Affected banks also take higher risk in loans.
Akin O, Coleman NS, Fons-Rosen C, et al., 2020, Political connections and informed trading: Evidence from TARP, Financial Management, Vol: 50, Pages: 619-644, ISSN: 0046-3892
We study insider trading behavior surrounding the largest bank bailout in history: Troubled Asset Relief Program (TARP). In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcement; for unconnected banks, trading and returns are uncorrelated. Results hold across insiders within the same bank and are stronger for finance-related government connections. Through a Freedom of Information Act request, we obtained the previously undisclosed TARP funds requested; the ratio of received to requested funds correlates both with abnormal returns and insider buying behavior in connected banks.
Abuka C, Alinda RK, Minoiu C, et al., 2019, Monetary policy and bank lending in developing countries: Loan applications, rates, and real effects, JOURNAL OF DEVELOPMENT ECONOMICS, Vol: 139, Pages: 185-202, ISSN: 0304-3878
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- Citations: 34
Morais B, Peydro J-L, Roldan-Pena J, et al., 2019, The international bank lending channel of monetary policy rates and QE: credit supply, reach-for-yield, and real fffects, The Journal of Finance, Vol: 74, Pages: 55-90, ISSN: 0022-1082
We identify the international credit channel by exploiting Mexican supervisory data sets and foreign monetary policy shocks in a country with a large presence of European and U.S. banks. A softening of foreign monetary policy expands credit supply of foreign banks (e.g., U.K. policy affects credit supply in Mexico via U.K. banks), inducing strong firm‐level real effects. Results support an international risk‐taking channel and spillovers of core countries’ monetary policies to emerging markets, both in the foreign monetary softening part (with higher credit and liquidity risk‐taking by foreign banks) and in the tightening part (with negative local firm‐level real effects).
Jimenez G, Ongena S, Peydro J-L, et al., 2017, Macroprudential Policy, Countercyclical Bank Capital Buffers, and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments, Journal of Political Economy, Vol: 125, Pages: 2126-2177, ISSN: 0022-3808
Boucinha M, Peydró J-L, Peydro J-L, 2017, Monetary policy and bank profitability in a low interest rate environment, Publisher: European Central Bank
We analyse the impact of standard and non-standard monetary policy measures on bankprofitability. For empirical identification, the analysis focuses on the euro area, thereby exploitingsubstantial bank and country heterogeneity within a monetary union where the central bank hasimplemented a broad range of unconventional policies, including quantitative easing and negativeinterest rates. We use both proprietary and commercial data on individual bank balance sheets andfinancial market prices. Our results show that monetary policy easing – a decrease in short-terminterest rates and/or a flattening of the yield curve – is not associated with lower bank profits oncewe control for the endogeneity of the policy measures to expected macroeconomic and financialconditions. Importantly, our analysis indicates that the main components of bank profitability areasymmetrically affected by accommodative monetary conditions, with a positive impact on loanloss provisions and non-interest income largely offsetting the negative one on net interest income.We also find that a protracted period of low interest rates might have a negative effect on profitsthat, however, only materialises after a long period of time and tends to be counterbalanced byimproved macroeconomic conditions. In addition, while more operationally efficient banks benefitmore from monetary policy easing, banks engaging more extensively in maturity transformationexperience a higher increase in profitability after a steepening of the yield curve. Finally, we assessthe impact of unconventional monetary policies on market-based measures of expected bankprofitability and credit risk, by employing an event study analysis using high frequency data, andfind that accommodative monetary policies tend to increase bank stock returns and reduce creditrisk.
Baskaya YS, di Giovanni J, Kalemli-Ozcan S, et al., 2017, Capital flows and the international credit channel, 39th Annual International Seminar on Macroeconomics (ISoM), Publisher: ELSEVIER SCIENCE BV, Pages: S15-S22, ISSN: 0022-1996
Ippolito F, Peydro J-L, Polo A, et al., 2016, Double bank runs and liquidity risk management, JOURNAL OF FINANCIAL ECONOMICS, Vol: 122, Pages: 135-154, ISSN: 0304-405X
Abbassi P, Iyer R, Peydro J-L, et al., 2016, Securities trading by banks and credit supply: Micro-evidence from the crisis, JOURNAL OF FINANCIAL ECONOMICS, Vol: 121, Pages: 569-594, ISSN: 0304-405X
Maddaloni A, Peydro J-L, 2016, THE CREDIT CHANNEL OF MONETARY POLICY IN THE EURO AREA, ROUTLEDGE HANDBOOK OF THE ECONOMICS OF EUROPEAN INTEGRATION, Editors: Badinger, Nitsch, Publisher: ROUTLEDGE, Pages: 132-142, ISBN: 978-0-415-74770-7
Ciccarelli M, Maddaloni A, Peydro J-L, 2015, Trusting the bankers: A new look at the credit channel of monetary policy, REVIEW OF ECONOMIC DYNAMICS, Vol: 18, Pages: 979-1002, ISSN: 1094-2025
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- Citations: 96
Gersl A, Jakubik P, Kowalczyk D, et al., 2015, Monetary Conditions and Banks' Behaviour in the Czech Republic, OPEN ECONOMIES REVIEW, Vol: 26, Pages: 407-445, ISSN: 0923-7992
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- Citations: 7
Ioannidou V, Ongena S, Peydro J-L, 2015, Monetary Policy, Risk-Taking, and Pricing: Evidence from a Quasi-Natural Experiment*, REVIEW OF FINANCE, Vol: 19, Pages: 95-144, ISSN: 1572-3097
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- Citations: 138
Ongena S, Peydro J-L, Van Horen N, 2015, Shocks Abroad, Pain at Home? Bank-Firm-Level Evidence on the International Transmission of Financial Shocks, IMF ECONOMIC REVIEW, Vol: 63, Pages: 698-750, ISSN: 2041-4161
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- Citations: 69
Akin O, Garcia Montalvo J, Garcia Villar J, et al., 2014, The real estate and credit bubble: evidence from Spain, SERIES-JOURNAL OF THE SPANISH ECONOMIC ASSOCIATION, Vol: 5, Pages: 223-243, ISSN: 1869-4187
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- Citations: 53
Jimenez G, Ongena S, Peydro J-L, et al., 2014, Hazardous times for monetary policy: what do twenty‐three million bank loans say about the effects of monetary policy on credit risk‐taking?, Econometrica: journal of the Econometric Society, Vol: 82, Pages: 463-505, ISSN: 0012-9682
We identify the effects of monetary policy on credit risk‐taking with an exhaustive credit register of loan applications and contracts. We separate the changes in the composition of the supply of credit from the concurrent changes in the volume of supply and quality, and the volume of demand. We employ a two‐stage model that analyzes the granting of loan applications in the first stage and loan outcomes for the applications granted in the second stage, and that controls for both observed and unobserved, time‐varying, firm and bank heterogeneity through time*firm and time*bank fixed effects. We find that a lower overnight interest rate induces lowly capitalized banks to grant more loan applications to ex ante risky firms and to commit larger loan volumes with fewer collateral requirements to these firms, yet with a higher ex post likelihood of default. A lower long‐term interest rate and other relevant macroeconomic variables have no such effects.
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