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Firms involved in international trade require an active and efficient financial market to facilitate their credit services and this is enhanced by financial openness. This study identified the impact of financial openness on Chinese firms' exports by 386 foreign-owned banks in China from 1996 to 2019 as a quasi-natural experiment. We constructed an estimation technique that combines the parallel trend test (PTT) and propensity score matching (PSM) with difference-in-difference (DID) estimators. We found that the gross and selection effects of financial openness are positive, and significantly increase firms' exports by 27.5%. Moreover, the impact differs for various firms: in terms of scale, small and micro firms benefit the most, and in terms of industry, manufacturing firms achieve the highest growth. Additionally, foreign-owned banks reduce firms' transaction costs and production expenditures, while increasing their total factor productivity (TFP) and credit alternatives.

In Chapter 6, Muysken and Meijers look at the increase in total assets of the financial sector in the Netherlands over the past 25 years from 600% of GDP in 1995 to over 1400% in 2020. There are specific features of the Dutch economy that caused the financial sector to continue to grow strongly even after the financial crisis. Two outstanding features are the continued growth of net trade surplus and the presence of a funded pension system with defined benefits. The authors analyse the growth of the financial sector in more detail using balance sheet data from the national account statistics. The explicit role of balance sheets and portfolios of financial assets of the various sectors in the model, together with the detailed impact of wealth effects on expenditure, makes it possible to identify the impact of financial sector operations in detail. In the present chapter, the authors employ the insights from their earlier analyses and the work of Meijers, Muysken and Sleijpen to construct a coherent data set from the national account data and to use these data to analyse the growth of the financial sector in the Netherlands over the past 25 years in a descriptive way.

We analyze contract-level data on approved and rejected microloans to assess the impact of a new credit registry in Bosnia and Herzegovina, a country with a competitive microcredit market. Our findings are threefold. First, information sharing reduces defaults, especially among new borrowers, and increases the return on lending. Second, lending tightens at the extensive margin as loan officers, using the new registry, reject more applications. Third, lending also tightens at the intensive margin: microloans become smaller, shorter, and more expensive. This affects both new borrowers and lending relationships established before the registry. In contrast, repeat borrowers whose lending relationship started after the registry introduction begin to benefit from larger loans at lower interest rates.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences. In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. In line with our previous research we argue that these phenomena can be captured very well by a stock flow consistent model in the tradition of Godley and Lavoie, which we estimate and simulate for the Netherlands. From simulations with our model we show that both housing price bubbles and asset price bubbles occur due to low interest rates and riskier bank behaviour, induced by a central bank policy of Quantitative Easing. The intended aim of this central bank policy – enhancing economic growth – is not reached, because the monetary stimulus is absorbed by the financial sector. Moreover, a presumably unintended consequence of Quantitative Easing in the Netherlands is an increase in wealth inequality.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences. In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. In line with our previous research we argue that these phenomena can be captured very well by a stock flow consistent model in the tradition of Godley and Lavoie, which we estimate and simulate for the Netherlands. From simulations with our model we show that both housing price bubbles and asset price bubbles occur due to low interest rates and riskier bank behaviour, induced by a central bank policy of Quantitative Easing. The intended aim of this central bank policy – enhancing economic growth – is not reached, because the monetary stimulus is absorbed by the financial sector. Moreover, a presumably unintended consequence of Quantitative Easing in the Netherlands is an increase in wealth inequality.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences. In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. In line with our previous research we argue that these phenomena can be captured very well by a stock flow consistent model in the tradition of Godley and Lavoie, which we estimate and simulate for the Netherlands. From simulations with our model we show that both housing price bubbles and asset price bubbles occur due to low interest rates and riskier bank behaviour, induced by a central bank policy of Quantitative Easing. The intended aim of this central bank policy – enhancing economic growth – is not reached, because the monetary stimulus is absorbed by the financial sector. Moreover, a presumably unintended consequence of Quantitative Easing in the Netherlands is an increase in wealth inequality.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have.The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences.In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. From simulations with our model we show (a) why housing price bubbles occur (due to riskier bank behaviour); (b) why asset price bubbles occur (also due to speculation by firms); (c) the destabilising impact of low interest rates on pension claims; (d) how these developments have contributed to an increasing wealth inequality and income inequality. We also show how inequality reacts to various shocks, for instance in the interest rate, the wage rate, the risk appetite of banks and firms and the fall in world trade.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene by stimulating ‘unconventional’ monetary policies. In earlier papers, we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. These developments create social tensions and therefore can have severe economic consequences. In the present paper, we bring all our earlier models together in one stock-flow consistent model, which we estimate and simulate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. From simulations with our model we show (a) why housing price bubbles occur (due to riskier bank behaviour); (b) why asset price bubbles occur (also due to speculation by firms); (c) the destabilising impact of low interest rates on pension claims; (d) how these developments have contributed to an increasing wealth inequality and income inequality. We also show how inequality reacts to various shocks, for instance in the interest rate, the wage rate, the risk appetite of banks and firms and the fall in world trade.

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene with stimulating ‘unconventional’ monetary policies. In earlier papers we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. This inequality was strengthened in countries with funded pension systems, because low interest rates strongly increased pension claims, which implies higher mandatory pension contributions for employees with different implications for young and old workers. Finally, there is a more evasive impact related to the attitude that rules that held prior to the financial crises should no longer be followed too close – the lenience allowed to enable individual banks to survive and to enable central banks to influence the economy directly since the low interest rate policy is no longer effective and has a demoralising impact on society. These developments create social tensions and therefore can have severe economic consequences. In the present paper we bring all our earlier models together in one stock-flow consistent model, which we estimate and calibrate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. From simulations with our model we show (a) why housing price bubbles occur (due to riskier bank behaviour); (b) why asset price bubbles occur (also due to speculation by firms); (c) the destabilising impact of low interest rates on pension claims; (d) how these developments have contributed to an increasing wealth inequality and income inequality. We also show how inequality reacts to various shocks, for instance in the interest rate, the wage rate, the risk appetite of banks and firms and the fall in world trade. JEL Code: E44, B5, E6, F45, G21, G32 Key words: financialisation, wealth distribution, income distribution, stock-flow consistent modelling

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene with stimulating ‘unconventional’ monetary policies. In earlier papers we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have. The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. This inequality was strengthened in countries with funded pension systems, because low interest rates strongly increased pension claims, which implies higher mandatory pension contributions for employees with different implications for young and old workers. Finally, there is a more evasive impact related to the attitude that rules that held prior to the financial crises should no longer be followed too close – the lenience allowed to enable individual banks to survive and to enable central banks to influence the economy directly since the low interest rate policy is no longer effective and has a demoralising impact on society. These developments create social tensions and therefore can have severe economic consequences. In the present paper we bring all our earlier models together in one stock-flow consistent model, which we estimate and calibrate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. From simulations with our model we show (a) why housing price bubbles occur (due to riskier bank behaviour); (b) why asset price bubbles occur (also due to speculation by firms); (c) the destabilising impact of low interest rates on pension claims; (d) how these developments have contributed to an increasing wealth inequality and income inequality. We also show how inequality reacts to various shocks, for instance in the interest rate, the wage rate, the risk appetite of banks and firms and the fall in world trade. JEL Code: E44, B5, E6, F45, G21, G32 Key words: financialisation, wealth distribution, income distribution, stock-flow consistent modelling

Deregulation and globalization since the early 1990s caused a boom in the current global financial cycle, which cumulated in the financial crisis in 2007. Austerity fiscal policies after the financial crisis induced Central Banks all over the world to intervene with stimulating ‘unconventional’ monetary policies. In earlier papers we developed several stock flow consistent models for an open Euro Area economy to investigate various aspects of the impact of these developments, with special attention to the role of the Central Bank with low interest policy and quantitative easing. We analysed the influence on mortgage growth and house prices, the growing amount of funded pension savings held abroad and the destabilising impact of low interest rates on pension claims, and the phenomenon that firms more and more use their savings for share buy-backs and (speculative) investments abroad – see Muysken and Meijers (2022) for an overview. However, we did not pay explicit attention to the distributional consequences these developments might have.The social and economic impact of the COVID crisis since early 2020 stimulated the awareness in the literature and the policy debate that the increase in house prices and asset prices invigorated wealth inequality. This inequality was strengthened in countries with funded pension systems, because low interest rates strongly increased pension claims, which implies higher mandatory pension contributions for employees with different implications for young and old workers. Finally, there is a more evasive impact related to the attitude that rules that held prior to the financial crises should no longer be followed too close – the lenience allowed to enable individual banks to survive and to enable central banks to influence the economy directly since the low interest rate policy is no longer effective and has a demoralising impact on society. These developments create social tensions and therefore can have severe economic consequences.In the present paper we bring all our earlier models together in one stock-flow consistent model, which we estimate and calibrate for the Netherlands. The model is based on a stock-flow consistent set of macroeconomic data, which we collected for the Netherlands. From simulations with our model we show (a) why housing price bubbles occur (due to riskier bank behaviour); (b) why asset price bubbles occur (also due to speculation by firms); (c) the destabilising impact of low interest rates on pension claims; (d) how these developments have contributed to an increasing wealth inequality and income inequality. We also show how inequality reacts to various shocks, for instance in the interest rate, the wage rate, the risk appetite of banks and firms and the fall in world trade.JEL Code: E44, B5, E6, F45, G21, G32Key words: financialisation, wealth distribution, income distribution, stock-flow consistent modelling

This article comments on the Consultation Report published by the Financial Stability Board (FSB) evaluating the success of regulatory reforms since the global financial crisis of 2007–2009. It argues that the FSB’s assessment of the role of equity is too narrow, being phrased in terms of bankruptcy avoidance and risk-taking incentives, without attention to debt overhang creating distortions in funding choices, the systemic impact of ample equity reducing deleveraging needs after losses, or equity contributing to smoothing of lending and asset purchases over time. The FSB’s treatment of systemic risk also pays too little attention to the mutual interdependence of different parts of the system, which is not well captured by linear causal relationships. Finally, the article points out that bank resolution of systemically important institutions is still not viable, due to lack of political acceptance of single-point-of-entry procedures and bail-in. Within the European Union, this viability is further undermined by the lack of sufficient funding for banks in resolution and the lack of fiscal backstops.

This paper examines how banks adjust their asset structure in response to changes in loan demand following natural disasters. We demonstrate how banks' asset diversification strategy helps clients smooth consumption and supports local recovery. In the empirical section, we apply the difference-in-differences method and determine that U.S. commercial banks increase real estate lending after disasters and sell government bonds to finance this disaster-driven credit surge. The theoretical section presents a novel multiple-asset dynamic credit allocation model that explains our empirical findings. We use model simulations to predict and quantify the potential impact of climate change on the asset structure and profitability of banks given different scenarios.

In the coming years, central bank capital adequacy will be key because central banks’ profits are under pressure following rising interest rates in response to higher inflation. Interestingly, central banks are not uniformly regulated and there is no consensus on the amount of capital that is considered adequate. In this context, we argue that central banks face several challenges in determining their capital adequacy. First, capital plays an indirect, auxiliary role as central banks cannot default on their own currency. Nonetheless adequate capital is necessary to maintain confidence that the central bank is effective in implementing monetary policy and is able to absorb the corresponding financial risks on a stand-alone basis, independently of the government. Second, different from commercial banks, central banks face “latent risks” in addition to the calculable financial risks from current exposures. These latent risks are financial risks from future exposures, that the central bank accepts under its mandate if needed. Examples are risks from contingent policy measures such as quantitative easing and lending of last resort. The size of these latent risks is proportional to, for instance, GDP or the size of the banking sector. We argue that a central bank’s target level of capital can be calibrated with a confidence level that is lower than that used for commercial banks due to the absence of default risk yet at the same time should take into account latent risks. We propose a set of guidelines to develop such a central bank capital policy.

We estimate the long-run effects of the 1930s Home Owners Loan Corporation (HOLC) redlining maps by linking children in the full count 1940 Census to 1) the universe of IRS tax data in 1974 and 1979 and 2) the long form 2000 Census. We use two identification strategies to estimate the potential long-run effects of differential access to credit along HOLC boundaries. The first strategy compares cross-boundary differences along HOLC boundaries to a comparison group of boundaries that had statistically similar pre-existing differences as the actual boundaries. A second approach only uses boundaries that were least likely to have been chosen by the HOLC based on our statistical model. We find that children living on the lower-graded side of HOLC boundaries had significantly lower levels of educational attainment, reduced income in adulthood, and lived in neighborhoods during adulthood characterized by lower educational attainment, higher poverty rates, and higher rates of single-headed households.

Disagreements over the systemic implications—the future—of financialization can be traced in part to the absence of sustained attention to the role of banking firms in driving this secular shift forward. That is, the financialization literature lacks an adequate microfoundation. Accounting for the drivers of financialization processes solely at the macro level overlooks the problems of how these processes came about and whether they are sustainable. This paper addresses this explanatory gap, arguing that a key independent microeconomic driver of increasing financialization did exist: the incessant efforts by money-centre banks in the USA to break out of Depression-era restrictions on their size, activities, and markets. These banks’ growth strategies in turbulent times led to an institutional (meso) shift—the rise of a megabank-centred shadow banking system—that now shapes global financial architecture even while operating in ways that are unsustainable. In short, too-big-to-manage megabanks are at the heart of the fragility and instability of the economy today.

We propose a novel approach to quantify spillovers on financial markets based on a structural version of the Diebold-Yilmaz framework. Key to our approach is a SVAR-GARCH model that is statistically identified by heteroskedasticity, economically identifiedby maximum shock contribution and that allows for time-varying forecast error variance decompositions. We analyze credit risk spillovers between EZ sovereign and bank CDS. Methodologically, we find the model to better match economic narratives compared with common spillover approaches and to be more reactive than models relying on rolling window estimations. We find, on average, spillovers to explain 37% of the variation in our sample, amid a strong variation of the latter over time.; Nous proposons une nouvelle méthodologie pour estimer les contagions financières à l’aided’une version structurelle de l’approche de Diebold-Yilmaz. Le cœur de notre approche repose sur un modèle SVAR-GARCH qui est identifié par hétéroscédasticité et par la contribution maximale des chocs, et qui permet d’obtenir des décompositions non-constantes de la variance des erreurs de prévision. Nous analysons les contagions entre les CDS souverains et bancaires de la Zone Euro. En termes de méthodologie, nous trouvons que notre modèle permet de mieux identifier les chocs par rapport aux autres approches de la littérature, et qu’il est aussi plus réactif que les modèles estimés sur fenêtres glissantes. Nous trouvons, en moyenne, que la contagion explique 37% de la variation des séries de notre échantillon, avec toutefois de fortes variations dans le temps.

Do banks charge an environmental premium when lending to publicly listed firms? Using a unique and comprehensive database on carbon emissions, we find that higher carbon emissions are associated with higher loan spreads. This effect exists for loans arranged by all lenders suggesting that spread premia are driven by environmental risks rather than investor preferences. Consistent with ex-post risk, companies without appropriate board-level responsibility pay higher spreads. While countries might introduce effective legislation to mitigate the effects of climate change, our results indicate that there is scope for a market-based solution to complement explicit environmental regulation.

Despite the contribution of previous studies to unravel the implications of mobile money in the developing world, the effect of this innovation on an important source of external finance, trade credit, has not been properly accounted for particularly in the informal sector. Using the 2016 FinAccess Household Survey, we investigate the relationship between mobile money adoption and the probability to receive goods and services on credit from suppliers based on a sample of entrepreneurs who operate informal businesses. We further explore the effect of mobile money adoption on the likelihood to offer goods and services on credit to customers. Our estimations suggest that entrepreneurs with mobile money are more likely to receive goods and sesrvices on credit from suppliers. We also find a positive and significant relationship between mobile money adoption and the likelihood to offer goods and services on credit to customers. The evidence supports the promotion of mobile money adoption among entrepreneurs in the informal sector to facilitate access to credit.

Despite the contribution of previous studies to unravel the implications of mobile money in the developing world, the effect of this innovation on an important source of external finance, trade credit, has not been properly accounted for particularly in the informal sector. Using the 2016 FinAccess Household Survey, we investigate the relationship between mobile money adoption and the probability to receive goods and services on credit from suppliers based on a sample of entrepreneurs who operate informal businesses. We further explore the effect of mobile money adoption on the likelihood to offer goods and services on credit to customers. Our estimations suggest that entrepreneurs with mobile money are more likely to receive goods and sesrvices on credit from suppliers. We also find a positive and significant relationship between mobile money adoption and the likelihood to offer goods and services on credit to customers. The evidence supports the promotion of mobile money adoption among entrepreneurs in the informal sector to facilitate access to credit.

Despite the contribution of previous studies to unravel the implications of mobile money in the developing world, the effect of this innovation on an important source of external finance, trade credit, has not been properly accounted for particularly in the informal sector. Using the 2016 FinAccess Household Survey, we investigate the relationship between mobile money adoption and the probability to receive goods and services on credit from suppliers based on a sample of entrepreneurs who operate informal businesses. We further explore the effect of mobile money adoption on the likelihood to offer goods and services on credit to customers. Our estimations suggest that entrepreneurs with mobile money are more likely to receive goods and sesrvices on credit from suppliers. We also find a positive and significant relationship between mobile money adoption and the likelihood to offer goods and services on credit to customers. The evidence supports the promotion of mobile money adoption among entrepreneurs in the informal sector to facilitate access to credit.

The policy response to COVID-19 includes the provision of credit guarantees to firms, a provision that may generate zombie lending. According to the recent literature, the relative performance of healthy firms deteriorates as the fraction of zombies increases. We argue that this literature faces a serious identification problem, because firm performance is often used to define zombies (sometimes implicitly). We show that, under general conditions for the distribution of firm performance, the correlation between healthy firm performance and zombies is a mechanical consequence of an increase in the fraction of zombies with no causal meaning. (JEL E44, G21) Received June 2, 2020; editorial decision June 23, 2020 by Editor Uday Rajan.

It is a well-known fact that the housing market, with its associated mortgage securities, plays a crucial role in modern economies. The recent crisis of 2007, triggered by the U.S. real estate bubble, confirms this key role and suggests the importance of regulating mortgage lending. This paper investigates these issues by designing a housing market with a linked mortgage lending instrument in the Eurace agent-based model. Our results show that the presence of a housing market in the model has relevant macroeconomic implications, driven mainly by the additional amount of endogenous money injected into the economy by new mortgages. This additional money generally helps to support and stabilize aggregated demand, thus improving the main economic indicators. However, if the regulation of mortgage lending is too lax, involving an increase in the debt-service-to-income ratio (DSTI), then the additional supply of mortgages no longer enhances macroeconomic performance, and the stability of the economic system is undermined. Based on a number of recent discussions, a regulation of stock control that targets households’ net wealth (a stock), rather than income (a flow) is designed and analyzed. The results show that regulation of stock control can be combined effectively with DSTI to increase the stability of the housing market and the economy as a whole. Interestingly, the regulation based on stock control also directly affects mortgage distribution among households, avoiding excessive concentration. From a policy perspective, our results suggest that the use of a mild flow control regulation, coupled with a stricter stock control measure, fosters sustainable growth and eases first-time buyers access to the housing market, encouraging homeownership.

The decline in the issuance of asset-backed securities (ABSs) since the financial crisis and the comparative advantage of covered bonds (CBs) as a funding alternative to ABSs raise the question of whether banks still issue ABSs as a way to receive funding. By applying double-hurdle regression models to a dataset of 134 European banks observed during the period from 2007 to 2013, this study reveals that banks with a covered bond program (CBP) securitize, ceteris paribus, less of their assets. The estimated difference in ABS issuance is driven mainly by banks being more likely to issue ABSs as a funding tool rather than trying to manage their credit risk exposure or to meet regulatory capital requirements. Consistently, a worse liquidity/funding position results in higher levels of securitization only for banks without a CBP. (C) 2017 Elsevier Ltd. All rights reserved.

in this article, we contribute to the current debate on the sign and size of the finance–growth relation. To this purpose, we use a meta-analysis with 551 estimates from 68 empirical studies that take private credit to gdp as a measure for financial development. We distinguish between linear and logarithmic specifications. First, we find evidence of significantly positive publication bias in both the linear and log-linear specifications. It suggests the literature has exaggerated the size of the finance–growth effect in the past. Second, we find suggestive evidence that the logarithmic specification is superior to the linear specification. In the logarithmic specification when accounting for publication bias, a 10% increase in credit to the private sector increases economic growth with 0.09 percentage points. For the linear estimates, no significant effect of credit to the private sector on economic growth is found on average. Overall, the evidence points to a positive but decreasing effect of financial development on growth and supports the ‘too much’ finance hypothesis.