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SUMMARY:Credit Allocation and Macroeconomic Fluctuations  - Karsten Mülle
 r (Princeton University)
DTSTART:20201126T130000Z
DTEND:20201126T140000Z
UID:TALK150928@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We study the relationship between credit expansions\, macroeco
 nomic fluctuations\, and financial crises using a novel database on the se
 ctoral distribution of private credit. Constructed from more than 600 sour
 ces\, these data allow us to map the sectoral allocation of credit across 
 116 countries starting in 1940 while matching data on total credit from ex
 isting sources. Equipped with this new resource\, we document a striking s
 hift in the composition of credit away from primary and manufacturing sect
 ors toward households\, construction\, real estate\, and other non-tradabl
 e sectors over the past five decades. Motivated by several salient case st
 udies\, including the Eurozone and Japanese banking crises\, we then ask w
 hether the allocation of firm credit across different industries plays a r
 ole in macroeconomic fluctuations. We find stark differences between diffe
 rent varieties of corporate credit expansions. In particular\, we show tha
 t lending to the construction\, real estate\, and non-tradable sectors are
  associated with a boom-bust pattern in output and elevated financial cris
 is risk\, similar to household credit booms. In contrast\, there is no suc
 h pattern for tradable-sector credit expansions\, which are often followed
  by stronger output growth. These patterns reject models in which debt pla
 ys a uniform role and instead support the idea that pre-determined differe
 nces across sectors shape interactions between finance and the real econom
 y.
LOCATION:Online
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