Capital Regulations and Credit Line Management during Crisis Times

(joint with María Teresa Valderrama from the Austrian Central Bank)


Credit line drawdowns by firms reduce a bank’s regulatory capital ratio. Using the Austrian Credit Register, we provide novel evidence that during the 2008-09 financial crisis, capital-constrained banks managed this concern by substantially cutting little-used credit lines. Controlling for a bank’s capital position, we also find that greater liquidity problems induced banks to considerably cut little-used credit lines over 2008-09. These results suggest that banks actively manage both capital and liquidity risk caused by undrawn credit lines in periods of financial distress, but thereby reduce liquidity provision to firms exactly when they need it most.



Good mine, bad mine: Natural resource heterogeneity and Dutch disease in Indonesia

(joint with Steven Poelhekke)


We analyse the local effect of exogenous shocks to the value of mineral deposits at the district level in Indonesia using a panel of manufacturing plants. To the best of our knowledge, we are the first to model and estimate the effect of heterogeneity in natural resource extraction methods. We find that in areas where mineral extraction is relatively capital-intensive, mining booms cause virtually no upward pressure on manufacturing earnings per worker, and both producers of traded and local goods benefit from mining booms in terms of employment. In contrast, labour-intensive mining booms drive up local manufacturing wages such that producers of traded goods reduce employment. This source of heterogeneity helps to explain the mixed evidence for `Dutch disease’ effects in the literature. In addition, we find no evidence that fiscal revenue sharing between sub-national districts leads to any spillovers.



The Impact of Policy Uncertainty on Manufacturing Firms: Evidence from Indonesia’s ‘Big Bang’ Decentralization

(joint with Steven Poelhekke)