JOB MARKET PAPER:
(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.
(joint with Steven Poelhekke; under review)
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. We introduce heterogeneity in natural resource extraction methods, which helps to explain the mixed evidence found in the `Dutch disease’ literature. In areas where mineral extraction is relatively capital-intensive, mining booms cause virtually no upward pressure on manufacturing wages, and both producers of traded and local goods benefit from mining booms in terms of employment. In contrast, labor-intensive mining booms drive up local manufacturing wages such that traded-goods producers reduce employment.