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UID:cb2f2e9555916656b2e05a40e75c3b31
CATEGORIES:Seminars
CREATED:20190301T183716
SUMMARY:Lunch Seminar: Fadi Hassan - Banca d'Italia
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:Trade Shocks and Credit Reallocation (joint with Stefano Federico e Veronic
 a Rappoport)\n\n\n\n\n\nAbstract:\nThe effect of trade liberalization on we
 lfare and economic activity remains one of the most important questions in 
 economics. The literature identifies a number of key determinants that redu
 ce the potential gains from trade, by focusing on frictions to labor mobili
 ty across regions or sectors. This paper contributes to this debate by expl
 oring a novel channel, namely the reallocation of credit across sectors in 
 the aftermath of a trade shock. Our results suggest that there are endogeno
 us financial frictions that arise from trade liberalization as, given the p
 ortfolio of firms they lend to, banks can be negatively affected by a trade
  shock. Using data from the Italian credit registry, matched with bank and 
 firm level data, we follow the evolution of the bank and firm activities ac
 ross sectors and regions prior to and after the entry of China into the WTO
 . We identify the sectors most affected by import competition from China an
 d estimate the transmission of this trade shock from firms to their lending
  banks, and the consequence of the shock on banks' lending to other firms. 
 We find that, controlling for credit demand, banks exposed to the China sho
 ck decrease their lending relative to non-exposed banks. Importantly, this 
 lending is reduced both for firms exposed and those non-exposed to competit
 ion from China. The main mechanism is related to the reduction of the core 
 capital of banks, and their resulting funding capacity, through the rise of
  non-performing loans. We quantify the impact of this effect on real outcom
 es such as output, investment, and employment. We find relevant aggregate e
 ffects such that employment would have been between 1.2 and 3.0 higher if t
 hese financial frictions were less binding.  \n
DTSTAMP:20260405T051707Z
DTSTART:20190515T130000Z
DTEND:20190515T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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