Working Papers
Stress-ridden finance and growth losses: does financial development break the link? [Download]
with Serafín Martínez-Jaramillo, Ricardo Montañez-Enríquez, Manuel Ramos-Francia, Anahí Rodríguez-Martínez ,
and José Manuel Sánchez-Martínez
IWH Discussion Papers, 3/2022
Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups. [Download]
with Helge C.N. Littke
Discussion Paper Deutsche Bundesbank No 16/2021
Download the Online Appendix here.
FX funding shocks and cross-border lending: The benefits of foreign relatives [Download]
with Fernando Eguren-Martin and Dennis Reinhardt
Bank of England Staff Working Paper No. 762 / 2019
Publications (refereed)
Foreign funding shocks and the lending channel: Do foreign banks adjust differently? [Download]
with Felix Noth
Finance Research Letters, Vol. (19), pp. 222-227, November 2016.
FX funding shocks and cross-border lending: The benefits of foreign relatives [Download]
with Fernando Eguren-Martin and Dennis Reinhardt
Journal of Money, Credit, and Banking, forthcoming
Media coverage: [Vox EU]
Download the Online Appendix here.
Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil. [Download]
with Lena Tonzer and Chris Becker
Journal of Corporate Finance, Elsevier, vol. 71, 102096, 2021
Download the Online Appendix here.
Media coverage: [All About Finance - World Bank]
Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups. [Download]
with Helge C.N. Littke
Journal of International Money and Finance, Elsevier, vol. 119(C), 2021
Download the Online Appendix here.
Media coverage: [The European Money and Finance Forum - SUERF]
Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil. [Download]
with Felix Noth
Journal of Financial Stability, Elsevier, vol. 56(C), 2021
Download the Online Appendix here.
Work in progress
Stranded in the wastelands? Natural capital depletion and bank deposit reallocation [Download]
with Manuel Ramos-Francia, Peter Karlström, and Ricardo Montañez-Enríquez
Abstract: Using unique field-collected series of natural capital stock in Mexico dating back to the 1980s, this paper documents that large natural capital losses induce banks to reallocate their deposits supply, retrenching from environmentally distressed regions and investing in new deposit franchises in regions with a high agricultural productivity and a large natural capital endowment. For identification, we exploit bank branches’ indirect exposure to natural capital losses affecting their parent banks across regions. In the long run, this deposit reallocation leads to a further deterioration in natural capital. The results highlight that climate adaptation responses can be conditioned by a natural capital depletion spiral fueled by a reallocation of banks geographical presence.
Clogged capital flows pipes? Non-bank global investors and the stability of sovereign bond flows [Download]
with Manuel Ramos-Francia and Ricardo Montañez-Enríquez
Abstract: Sovereign debt markets in emerging countries are increasingly exposed to foreign non-bank market players. In this paper, we explore the implications of this changing pattern by examining the impact of non-resident bond holders on the stability of bond flows to EMEs. Using quantile regressions and a weekly panel between 2004 and 2023 for five Latin American economies, we find that the link between global financial factors and bond outflows can be explained by sovereign debt exposure to global asset managers and ETFs portfolios. More resilient pipes and policy commitments attenuate this effect. These results highlight that the fear of liquidity being gated in clogged pipes can be a motive explaining the increasingly volatile environment of bond flows to EMEs.
Trade disruptions and global banking [Download]
with Allen N. Berger, Freddy Pinzón-Puerto, and Peter Karlström
Abstract: Does global banking alleviate or exacerbate the transmission of major disruptions in global trade? Using novel data linking regional banking markets with import flows to Brazil, we document that the presence of global banks at the municipal level is associated with a weakened transmission of trade disruptions to imports. For identification, we exploit municipalities’ exposure to pandemic-related lockdowns in their trade partners abroad, controlling for local imports demand. The supply-driven and robust results suggest that global banks compensate for the effect of lockdowns by providing wider access to US dollar funding. This evidence highlights a strong link between global banking and the resilience of real-sector integration.
Income inequality and capital reallocation in the presence of financial frictions [Download]
Abstract: Does income inequality affect banks' credit risk reallocation when facing financial distress? Using novel branch-level data on Colombian banks I find that facing a large liquidity shock, exposed banks shift more credit towards low-risk borrowers in municipalities with higher income inequality. For identification I compare branches’ reaction to a foreign funding shock within banks and across regions by simultaneously absorbing local demand. Collateral frictions play a key role: while the overall effect is stronger in regions with higher collateral constraints, credit backed by better collateral remains consistently shielded. Regional-level estimates suggest that this `inequality risk-taking channel’ can account for a significant share of consumption growth in crisis periods.
Stress-ridden finance and growth losses: does financial development break the link? [Download]
with Serafín Martínez-Jaramillo, Ricardo Montañez-Enríquez, Manuel Ramos-Francia, Anahí Rodríguez-Martínez ,
and José Manuel Sánchez-Martínez
IWH Discussion Papers, 3/2022
Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups. [Download]
with Helge C.N. Littke
Discussion Paper Deutsche Bundesbank No 16/2021
Download the Online Appendix here.
FX funding shocks and cross-border lending: The benefits of foreign relatives [Download]
with Fernando Eguren-Martin and Dennis Reinhardt
Bank of England Staff Working Paper No. 762 / 2019
Publications (refereed)
Foreign funding shocks and the lending channel: Do foreign banks adjust differently? [Download]
with Felix Noth
Finance Research Letters, Vol. (19), pp. 222-227, November 2016.
FX funding shocks and cross-border lending: The benefits of foreign relatives [Download]
with Fernando Eguren-Martin and Dennis Reinhardt
Journal of Money, Credit, and Banking, forthcoming
Media coverage: [Vox EU]
Download the Online Appendix here.
Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil. [Download]
with Lena Tonzer and Chris Becker
Journal of Corporate Finance, Elsevier, vol. 71, 102096, 2021
Download the Online Appendix here.
Media coverage: [All About Finance - World Bank]
Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups. [Download]
with Helge C.N. Littke
Journal of International Money and Finance, Elsevier, vol. 119(C), 2021
Download the Online Appendix here.
Media coverage: [The European Money and Finance Forum - SUERF]
Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil. [Download]
with Felix Noth
Journal of Financial Stability, Elsevier, vol. 56(C), 2021
Download the Online Appendix here.
Work in progress
Stranded in the wastelands? Natural capital depletion and bank deposit reallocation [Download]
with Manuel Ramos-Francia, Peter Karlström, and Ricardo Montañez-Enríquez
Abstract: Using unique field-collected series of natural capital stock in Mexico dating back to the 1980s, this paper documents that large natural capital losses induce banks to reallocate their deposits supply, retrenching from environmentally distressed regions and investing in new deposit franchises in regions with a high agricultural productivity and a large natural capital endowment. For identification, we exploit bank branches’ indirect exposure to natural capital losses affecting their parent banks across regions. In the long run, this deposit reallocation leads to a further deterioration in natural capital. The results highlight that climate adaptation responses can be conditioned by a natural capital depletion spiral fueled by a reallocation of banks geographical presence.
Clogged capital flows pipes? Non-bank global investors and the stability of sovereign bond flows [Download]
with Manuel Ramos-Francia and Ricardo Montañez-Enríquez
Abstract: Sovereign debt markets in emerging countries are increasingly exposed to foreign non-bank market players. In this paper, we explore the implications of this changing pattern by examining the impact of non-resident bond holders on the stability of bond flows to EMEs. Using quantile regressions and a weekly panel between 2004 and 2023 for five Latin American economies, we find that the link between global financial factors and bond outflows can be explained by sovereign debt exposure to global asset managers and ETFs portfolios. More resilient pipes and policy commitments attenuate this effect. These results highlight that the fear of liquidity being gated in clogged pipes can be a motive explaining the increasingly volatile environment of bond flows to EMEs.
Trade disruptions and global banking [Download]
with Allen N. Berger, Freddy Pinzón-Puerto, and Peter Karlström
Abstract: Does global banking alleviate or exacerbate the transmission of major disruptions in global trade? Using novel data linking regional banking markets with import flows to Brazil, we document that the presence of global banks at the municipal level is associated with a weakened transmission of trade disruptions to imports. For identification, we exploit municipalities’ exposure to pandemic-related lockdowns in their trade partners abroad, controlling for local imports demand. The supply-driven and robust results suggest that global banks compensate for the effect of lockdowns by providing wider access to US dollar funding. This evidence highlights a strong link between global banking and the resilience of real-sector integration.
Income inequality and capital reallocation in the presence of financial frictions [Download]
Abstract: Does income inequality affect banks' credit risk reallocation when facing financial distress? Using novel branch-level data on Colombian banks I find that facing a large liquidity shock, exposed banks shift more credit towards low-risk borrowers in municipalities with higher income inequality. For identification I compare branches’ reaction to a foreign funding shock within banks and across regions by simultaneously absorbing local demand. Collateral frictions play a key role: while the overall effect is stronger in regions with higher collateral constraints, credit backed by better collateral remains consistently shielded. Regional-level estimates suggest that this `inequality risk-taking channel’ can account for a significant share of consumption growth in crisis periods.