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Working Paper
How Climate Change Shapes Bank Lending: Evidence from Portfolio Reallocation
I document how bank lending has changed in response to climate change by analyzing changes in bank loan portfolios since 2012. Using supervisory data providing loan-level portfolios of the largest U.S. banks, I find that banks significantly reduced lending to areas more impacted by climate change starting around 2015. Using flood risk and wildfire risk as proxies for climate risk, I estimate a one standard deviation increase in climate risk reduces county-level balances in banks’ portfolios by up to 4.7 percent between 2014 and 2020 in counties with large loan balances. The aggregate trend ...
Working Paper
The Long-Run Real Effects of Banking Crises: Firm-Level Investment Dynamics and the Role of Wage Rigidity
I study the long-run effects of credit market disruptions on real firm outcomes and how these effects depend on nominal wage rigidity at the firm level. Exploiting variation in firms' refinancing needs during the global financial crisis, I trace out firms' investment and growth trajectories in response to a credit supply shock. Financially shocked firms exhibit a temporary investment gap for two years, resulting in a persistent accumulated growth gap six years after the crisis. Shocked firms with rigid wages exhibit a significantly steeper drop in investment and an additional long-run growth ...
Working Paper
“Don't Know What You Got Till It’s Gone” — The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market
The Community Reinvestment Act (CRA), enacted in 1977, has served as an important tool to foster access to financial services for lower-income communities across the country. This study provides new evidence on the effectiveness of CRA on mortgage lending by focusing on a large number of neighborhoods that became eligible and ineligible for CRA credit in the Philadelphia market because of an exogenous policy shock in 2014. The CRA effects are more evident when a lower-income neighborhood loses its CRA coverage, which leads to a 10 percent or more decrease in purchase originations by ...
Working Paper
The costs and benefits of liquidity regulations: Lessons from an idle monetary policy tool
We investigate how liquidity regulations affect banks by examining a dormant monetary policy tool that functions as a liquidity regulation. Our identification strategy uses a regression kink design that relies on the variation in a marginal high-quality liquid asset (HQLA) requirement around an exogenous threshold. We show that mandated increases in HQLA cause banks to reduce credit supply. Liquidity requirements also depress banks' profitability, though some of the regulatory costs are passed on to liability holders. We document a prudential benefit of liquidity requirements by showing that ...