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on Microfinance |
| By: | Tomohiro Hirano; Ryo Jinnai; Alexis Akira Toda |
| Abstract: | We present a new theoretical framework to think about asset price bubbles in dividend-paying assets. We study a general equilibrium microfinance model with a positive feedback loop between capital investment and land price, whose magnitude is affected by financial leverage. As leverage is relaxed beyond a critical value, a phase transition occurs from balanced growth of a stationary nature where land prices reflect fundamentals (present value of rents) to unbalanced growth of a nonstationary nature where land prices grow faster than rents, generating a land price bubble. Unbalanced growth dynamics and bubbles are associated with financial deregulation and technological progress. Keywords : land bubble, leverage, nonstationarity, phase transition, unbalanced growth. JEL codes : D52, D53, E44, G12. |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:23-015e&r=mfd |
| By: | Ryoji Ohdoi (School of Economics, Kwansei Gakuin University); Kazuo Mino (Kyoto Institute of Economic Research, Kyoto University); Yunfang Hu (Graduate School of Economics, Kobe University) |
| Abstract: | This study constructs a two-country endogenous growth model with heterogeneous firms and asymmetric countries, where the asymmetry lies in the degree of financial frictions. The tradable intermediate goods sector consists of heterogeneous firms and requires specific goods for entry. These goods are produced by heterogeneous entrepreneurs facing credit constraints due to financial frictions. Using this framework, we derive the following results analytically. First, a permanent credit crunch in one country facilitates the exit of intermediate goods firms in that country; meanwhile, it decreases the profitability of exports of the other country’s intermediate goods firms, causing exporters to switch to selling their goods domestically. Second, under no international lending and borrowing, the credit crunch reduces the growth rates of both countries not only in the long run but also during the transition to a new balanced growth path. We also compare the long-run effects under such a financial autarky and financial integration. |
| Keywords: | Banks; Endogenous growth; Heterogeneous firms; Asymmetric countries; Financial frictions; Country-specific credit crunch |
| JEL: | F12 F43 O16 O41 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:256&r=mfd |
| By: | Olga Gorbachev; Maria Jose Luengo-Prado; J. Christina Wang |
| Abstract: | This study explores the mechanisms explaining the large, persistent effect of the 10-day funding delay in the 2020 Paycheck Protection Program (PPP) on employment recovery during the COVID-19 pandemic, as estimated by Doniger and Kay (2021). We find that the top 1 percent of urban counties by population fully account for the significant effect of the delay on county-level employment. The strong correlation between worse loan delay and slower employment growth in these counties is due to a factor commonly omitted from analyses: The nature of business and the high rate of human interactions in major urban centers render these areas exceptionally and persistently vulnerable to infectious diseases. Moreover, we find that receiving more PPP funding and more transfers from other pandemic-related assistance programs contributed significantly more to local economic recovery compared with receiving PPP funds earlier. |
| Keywords: | COVID-19; Paycheck Protection Program; small business credit; remote work; employment |
| JEL: | E24 G28 H81 J21 |
| Date: | 2023–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:96572&r=mfd |
| By: | Isha Agarwal; Malin Hu; Raluca Roman; Keling Zheng |
| Abstract: | We propose a new conceptual framework for monetary policy transmission through shadow banks in the mortgage market that highlights the role of mortgage servicing in generating non-deposit funds for lending. We document that mortgage servicing acts as a natural hedge against interest rate shocks and dampens the effect of monetary policy on shadow bank mortgage lending. Higher interest rates reduce prepayment risk, increasing the collateral value of mortgage servicing assets and cashflow from servicing income. This enables shadow banks with greater exposure to mortgage servicing to obtain more funding. The mortgage servicing channel is weaker for traditional banks due to their reliance on deposit funding and the capital charge on mortgage servicing assets. Our estimates imply that the rising share of shadow banks in mortgage servicing has weakened the pass-through of monetary policy to aggregate mortgage lending. |
| JEL: | E52 G21 |
| Date: | 2023–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:96519&r=mfd |