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Jel Classification:O16 

Working Paper
Interest Rate Volatility and Sudden Stops : An Empirical Investigation

Using a multi-country regime-switching vector autoregressive (VAR) model we document the existence of two regimes in the volatility of interest rates at which emerging economies borrow from international financial markets, and study the statistical relationship of such regimes with episodes of sudden stops. Periods of high volatility tend to be persistent and are associated with high interest rates, the occurrence of sudden stops in external financing, and large declines in economic activity. Most strikingly, we show that regime switches drive the countercyclicality of interest rates in ...
International Finance Discussion Papers , Paper 1209

Working Paper
Internal Liquidity Management and Local Credit Provision

This paper studies the patterns of internal liquidity management and their effect on bank lending, using a novel branch-level dataset of Brazilian banks. Our results suggest that internal liquidity management increases during times of financial stress. Privately owned banks are most affected by a liquidity shock, and increase the level of internal funding to maintain their branch lending, while their government-owned competitors react strategically. Private and government banks increase the funding of branches in concentrated and riskier areas. This funding translates into more lending, as ...
International Finance Discussion Papers , Paper 1204

Working Paper
Government Connections and Financial Constraints: Evidence from a Large Representative Sample of Chinese Firms

We examine the role of firms' government connections, defined by government intervention in CEO appointment and the status of state ownership, in determining the severity of financial constraints faced by Chinese firms. We demonstrate that government connections are associated with substantially less severe financial constraints (i.e., less reliance on internal cash flows to fund investment), and that the sensitivity of investment to internal cash flows is higher for firms that report greater obstacles to obtaining external funds. We also find that those large non-state firms with weak ...
International Finance Discussion Papers , Paper 1129

Journal Article
Taking Stock of the Evidence on Microfinancial Interventions

We review the empirical evidence on microfinance and asset grants to the ultra poor or microentrepreneurs and use quantitative economic theory to account for this evidence. Properly executed, these interventions can help segments of the population increase their income and consumption, but neither literature gives much reason to believe that such interventions can lead to wide-scale, transformative impacts akin to escaping aggregate poverty traps.
Review , Volume 102 , Issue 2 , Pages 173-202

Working Paper
Institutions and return predictability in oil-exporting countries

We study whether stock market returns in oil-exporting countries can be predicted by oil price changes, and we investigate the link between predictability and the quality of each country's institutions. Returns are predictable for half the countries we consider, and predictability is stronger when institutional quality is lower. We argue that the relation between predictability and institutional quality reflects the preference of countries with weaker institutions to consume oil windfalls locally rather than smooth out the impact of windfalls by, for instance, investing the proceeds through a ...
Finance and Economics Discussion Series , Paper 2015-14

Working Paper
Can Self-Help Groups Really Be 'Self-Help'?

We provide an experimental and theoretical evaluation of a cost-reducing innovation in the delivery of "self-help group" microfinance services, in which privatized agents earn payments through membership fees for providing services. Under the status quo, agents are paid by an outside donor and offer members free services. In our multi-country randomized control trial we evaluate the change in this incentive scheme on agent behavior and performance, and on overall village-level outcomes. We find that privatized agents start groups, attract members, mobilize savings, and intermediate loans at ...
International Finance Discussion Papers , Paper 1155

Working Paper
Misallocation, informality, and human capital: understanding the role of institutions

Accepted for publication, Journal of Economic Dynamics and Control The aim of this paper is to quantify the role of formal-sector institutions in shaping the demand for human capital and the level of informality. We propose a firm dynamics model where firms face capital market imperfections and costs of operating in the formal sector. Formal firms have a larger set of production opportunities and the ability to employ skilled workers, but informal firms can avoid the costs of formalization. These firm-level distortions give rise to endogenous formal and informal sectors and, more importantly, ...
Working Papers , Paper 14-11

Journal Article
Venture Capital: A Catalyst for Innovation and Growth

This article studies the development of the venture capital (VC) industry in the United States and assesses how VC financing affects firm innovation and growth. The results highlight the essential role of VC financing for U.S. innovation and growth and suggest that VC development in other countries could promote their economic growth.
Review , Volume 104 , Issue 2 , Pages 120-130

Report
Patterns of rainfall insurance participation in rural India

This paper describes the contract design and institutional features of an innovative rainfall insurance policy offered to smallholder farmers in rural India and presents preliminary evidence on the determinants of insurance participation. Insurance take-up is found to be decreasing in basis risk between insurance payouts and income fluctuations, higher among wealthy households, and lower among households that are credit constrained. These results match predictions of a simple neoclassical model appended with borrowing constraints. Other patterns are less consistent with the benchmark model. ...
Staff Reports , Paper 302

Working Paper
Capital Gains Taxation and Investment Dynamics

This paper quantifies the long-run effects of reducing capital gains taxes on aggregate investment. We develop a dynamic general equilibrium model with heterogeneous firms, which face discrete capital gains tax rates based on firm size. We calibrate our model by targeting micro moments and a difference-in-differences estimate of the capital stock response based on the institutional setting and policy reform in Korea. We find that the reform that reduced the capital gains tax rates for a subset of firms substantially increased investment in the short run, and capturing general equilibrium ...
Working Papers , Paper 2018-31

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