We document a housing portfolio channel of monetary policy transmission using German household data in a difference-in-differences setting around the ECB's implementation of quantitative easing (QE) in 2015. We find that QE encourages households with larger initial bond positions to rebalance more toward second homes. Rebalancing is especially pronounced among higher income and church-affiliated households with stronger tax incentives to purchase and rent out properties. We also show that, in regions more exposed to this channel, house prices increase more than rents, and sale listings decrease more than rental ones, suggesting that the rental supply may increase in response to QE.

Chinese portfolio equity outflows grew significantly over time due to capital account liberalization. Using matched stock-fund holding data under the Qualified Domestic Institutional Investor (QDII) program, we identify a nascent financial channel of international transmission of Chinese monetary policy to world stock markets. Event studies around monetary policy announcement days uncover a cross-sectional differential impact: returns on MSCI indexes and U.S. stocks with QDII exposure are more responsive than those of non-exposed ones. The effects are driven by smaller, less liquid, and lower-turnover stocks, but not by China-concept stocks, or those exposed to mainland macroeconomic shocks. We also provide evidence consistent with a retail-driven portfolio-rebalancing mechanism: tightening periods are associated with outflows from QDII funds with high equity portfolio shares that fund managers do not fully offset. Retail flows also seem more closely associated with monetary policy changes than institutional flows.

In this paper, we show that cross-border portfolio flows around the peak of the European Crisis induced households to rebalance their portfolios towards housing. Estimating difference-indifferences regressions around Draghi's "Whatever It Takes" speech in July 2012 with household data from the ECB's Household Finance and Consumption Survey, we find that portfolio inflows induce households with larger ex-ante bond and equity shares to rebalance more strongly towards housing. The effect is not driven by higher pre-treatment access to credit or higher credit growth during the treatment period and is stronger for wealthier and less risk-averse households.

In this paper, we revisit the question of how to manage financial crises using the framework proposed by Bianchi and Mendoza (2018). We show that this model economy exhibits a multiplicity of constrained-efficient equilibria, which arises because the private shadow value of collateral influences the forward-looking asset price. Among these equilibria, the specific one studied in Bianchi and Mendoza (2018) can be implemented using a tax/subsidy on debt alone. In that case, both the ex ante tax and ex post subsidy are quantitatively important for welfare under the optimal time-consistent policy. Limiting either component can lead to a welfare loss relative to the unregulated competitive equilibrium, highlighting the complementarity between crisis prevention and crisis resolution tools. We also show that, under certain conditions, all Pareto-dominant constrained-efficient equilibria entail the unconstrained allocation chosen by a social planner subject to the country budget constraint, and this allocation can be implemented with purely ex post policies. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

We develop a new model of cycles and crises in emerging markets, featuring an occasionally binding borrowing constraint and stochastic volatility, and estimate it with quarterly data for Mexico since 1981. We propose an endogenous regime-switching formulation of the occasionally binding borrowing constraint, develop a general perturbation method to solve the model, and estimate it using Bayesian methods. We find that the model fits the Mexican data well without systematically relying on large shocks, matching the typical stylized facts of emerging market business cycles and Mexico's history of sudden stops in capital flows. We also find that interest rate shocks play a smaller role in driving both cycles and crises than previously found in the literature.

We build and estimate a model of endogenous growth and banking efficiency in which banks adopt technology embedded in capital goods produced by entrepreneurs, and agents choose whether to be workers or capital goods-producing entrepreneurs. In this setting, aggregate firm productivity affects bank efficiency and vice versa. We find that closing down the technology adoption by banks reduces aggregate productivity growth by 16.7 percent. Empirical evidence based on US Call Report data is consistent with the bank technology adoption mechanism at the core of the model.

In this paper, we show that cross-border portfolio flows around the peak of the European Crisis induced households to rebalance their portfolios toward housing. Estimating difference-in-differences regressions around Draghi's "Whatever It Takes" speech in July 2012 with household data from the ECB's Household Finance and Consumption Survey, we find that portfolio inflows induce households with larger ex-ante bond and equity shares to rebalance more strongly toward housing. The effect is not driven by higher pre-treatment access to credit or higher credit growth during the treatment period, and is stronger for wealthier and less risk-averse households.

This paper investigates the direct and spillover effects on mobility caused by the staggered adoption of stay-at-home orders (SHOs) implemented by U.S. counties to contain COVID-19 at the beginning of the pandemic. We find that mobility in neighboring counties declines by a third to a half as much as in the counties that implement the SHOs. Furthermore, these spillovers are concentrated in counties that share media markets with treated counties. Using directional mobility data, we also find that declines in internal mobility in the neighbor counties account for a much larger proportion of the overall decline in mobility than decreases in traffic originating in the treated counties. Together, these results provide strong evidence that SHOs operate through information sharing and voluntary social distancing. Based on our estimates and a simple model of staggered SHO adoption, we construct counterfactual scenarios that separate the impact of policy coordination from that of adoption timing. We find that staggered implementation of SHOs could yield mobility reductions that are larger than coordinated but delayed SHO adoption.

By exploiting changes in the volatility of U.S. Treasury yields and foreign official (FO) flows into U.S. Treasuries after the 2008 Global Financial Crisis, we identify a FO flow shock via heteroskedasticity in a structural VAR. We estimate that a $100B FO flow shock moves 5 and 10-year U.S. yields by about 100 basis points within a month. An event study of the intraday U.S. Treasury yield curve response to Japan’s FX intervention in September 2022 validates our VAR estimates. Our findings imply that a 1% reduction in the Dollar share of China’s reserves could raise long-term U.S. yields by about 20 basis points.

There is a new and now large literature analyzing government poli-cies for financial stability based on models with endogenous borrow-ing constraints. These normative analyses build upon the concept of constrained efficient allocation where the social planner is con-strained by the same borrowing limit that agents face. In this paper, we show that there exists at least one set of tools implementing the constrained efficient allocation that can also be used by a Ramsey planner to replicate an unconstrained allocation, achieving higher welfare. Constrained efficiency may lead to inaccurate character-izations of welfare maximizing policies relative to Ramsey optimal policy. (JEL E32, E44, E61, G01, H21)

This paper conducts an event study of 30 quantitative easing (QE) announcements made by 21 central banks on daily government bond yields and bilateral US dollar exchange rates in March and April 2020, in the midst of the global financial turmoil triggered by the COVID-19 outbreak. The paper also investigates the transmission of innovations to long-term interest rates in a standard GVAR model estimated with quarterly pre-COVID-19 data. We find that QE has not lost effectiveness in advanced economies and that its international transmission is consistent with the working of long-run uncovered interest rate parity and a large dollar shortage shock during the COVID-19 period. In emerging markets, the QE impact on bond yields is much stronger and its transmission to exchange rates is qualitatively different than in advanced economies. The GVAR evidence that we report illustrates the Fed's pivotal role in the global transmission of long-term interest rate shocks, but also the ample scope for country-specific interventions to affect local financial market conditions, even after controlling for common factors and spillovers from other countries. The GVAR evidence also shows that QE interventions can have sizable real effects on output driven by a very persistent impact on long-term interest rates.

This paper estimates time-varying COVID-19 reproduction numbers worldwide solely based on the number of reported infected cases, allowing for under-reporting.Estimation is based on a moment condition that can be derived from an agent-based stochastic network model of COVID-19 transmission.The outcomes in terms of the reproduction number and the trajectory of per-capita cases through the end of 2020 are very diverse.The reproduction number depends on the transmission rate and the proportion of susceptible population, or the herd immunity effect.Changes in the transmission rate depend on changes in the behavior of the virus, reflecting mutations and vaccinations, and changes in people's behavior, reflecting voluntary or government mandated isolation.Over our sample period, neither mutation nor vaccination are major factors, so one can attribute variation in the transmission rate to variations in behavior.Evidence based on panel data models explaining transmission rates for nine European countries indicates that the diversity of outcomes results from the non-linear interaction of mandatory containment measures, voluntary precautionary isolation, and the economic incentives that governments provided to support isolation.These effects are precisely estimated and robust to various assumptions.As a result, countries with seemingly different social distancing policies achieved quite similar outcomes in terms of the reproduction number.These results imply that ignoring the voluntary component of social distancing could introduce an upward bias in the estimates of the effects of lock-downs and support policies on the transmission rates.The full set of estimation results and the replication package are available on the authors' websites.

Local policies can have substantial spillovers both across geographies and markets. Little is known about the impact of public health regulations across administrative borders. We estimate U.S. county level direct and spillover effects of Stay-at-Home-Orders (SHOs) aimed at containing the spread of COVID-19 on mobility and social interaction measures. We propose a modified difference-in-difference regression design, based on contiguous-county triplets. This approach compares treated counties, which adopted the SHO, and neighbors, to the neighbor's neighbors, which we term hinterland, counties. We find that mobility in neighboring counties declined by a third to a half as much as in the treated locations. These spillover effects are concentrated in neighbors that share media markets with treated counties. Using directional mobility data, we decompose the spillover decline in mobility into reductions in external visits coming from the treated county and an even stronger voluntary decline in the neighbor county's own traffic. Together, our results provide strong evidence that SHOs operate through information sharing and illustrate the quantitative importance of voluntary social distancing. The finding that the estimated spillovers are in the same direction as the direct effects casts doubt on the prevailing narrative that a more nationally coordinated policy response would have accomplished a greater reduction in mobility and contacts.

This paper conducts an event study of 30 quantitative easing (QE) announcements made by 21 central banks on daily government bond yields and bilateral US dollar exchange rates in March and April 2020, in the midst of the global financial turmoil triggered by the COVID-19 outbreak. The paper also investigates the transmission of innovations to long-term interest rates in a standard GVAR model estimated with quarterly pre-COVID-19 data. We find that QE has not lost effectiveness in advanced economies and that its international transmission is consistent with the working of long-run uncovered interest rate parity and a large dollar shortage shock during the COVID-19 period. In emerging markets, the QE impact on bond yields is much stronger and its transmission to exchange rates is qualitatively different than in advanced economies. The GVAR evidence that we report illustrates the Fed’s pivotal role in the global transmission of long-term interest rate shocks, but also the ample scope for country-specific interventions to affect local financial market conditions, even after controlling for common factors and spillovers from other countries. The GVAR evidence also shows that QE interventions can have sizable real effects on output driven by a very persistent impact on long-term interest rates. Alessandro Rebucci Johns Hopkins Carey Business School 100 International Drive Baltimore, MD 21202 and NBER arebucci@jhu.edu Jonathan S. Hartley Harvard Kennedy School 79 John F. Kennedy Street Cambridge, MA 02138 jhartley@hks.harvard.edu Daniel Jiménez EAFIT University Medellín, Antioquia Columbia cjimen23@eafit.edu.co

We estimate the likelihood of financial distress of U.S. hospitals in 2020 due to the COVID-19 pandemic using AHA Annual Survey data for 2011-2019 and smartphone mobility data for 2020.We find that while the average likelihood of distress across all hospitals is 28.53 % in 2020, slightly increasing from 2019, for-profit hospitals are much more likely to be distressed.Their average likelihood of financial distress is 39.13 %---a 6.93 percentage point increase from 2019.For-profit hospitals are the main providers of specialty health care services, such as psychiatric and acute long-term care, so their increased likelihood of distress poses a risk to service provision in these specialty areas, and particularly in rural communities.Our prediction model based on mobility data performs very well in sample against actual data and can potentially help policymakers and hospital administrators to monitor financial distress in real-time when case mixes change, or other large shocks materialize.

This paper studies the high and persistent U.S. cost of financial intermediation (CFI) documented by Philippon (2015) and its inverted U-shape behavior since the mid-1960s. We build a novel model of endogenous growth and bank intermediation and introduce imperfect bank competition, bank IT adoption and bank entry, and an occupational choice that determines the relative size of the labor force and the economy's average level of managerial ability. The interplay between verification costs, market structure, and occupational choice delivers implications for the CFI which are qualitatively consistent with the stylized facts of the U.S. economy. We find that the banking sector structure is the main determinant of the long-run level of the CFI. We also show that the U.S. productivity growth slowdown from the mid-1960s to the mid-1980s is a major driver of the simultaneous increase in the CFI and the number of banks during this period and their subsequent decline.

We study how capital flows affects German cities’ GDP growth depending on the state of their real estate markets. Identification exploits a policy framework assigning refugees to cities on a quasi-random basis and variation in nondevelopable area for the construction of an exposure measure to real estate market tightness. We estimate that the most exposed cities to real estate market tightness grew at least 1.9 percentage points more than the least exposed ones, cumulatively, from 2009 to 2014. Capital inflows shift credit to firms with more collateral, which leads firms to hire and invest more in response to these shocks.

This paper develops a threshold-augmented dynamic multi-country model (TGVAR) to quantify the macroeconomic effects of the Covid-19 pandemic. We show that there exist threshold effects in the relationship between output growth and excess global volatility at individual country levels in a significant majority of advanced economies and several emerging markets. We then estimate a more general multi-country model augmented with these threshold effects as well as long term interest rates, oil prices, exchange rates and equity returns to perform counterfactual analyses. We distinguish common global factors from trade-related spillovers, and identify the Covid-19 shock using GDP growth projection revisions of the IMF in 2020Q1. We account for sample uncertainty by bootstrapping the multi-country model estimated over four decades of quarterly observations. Our results show that, without policy support, the Covid-19 pandemic would cause a significant and long-lasting fall in world output, with outcomes that are quite heterogenous across countries and regions. While the impact on China and other emerging Asian economies are estimated to be less severe, the United Kingdom, and several other advanced economies may experience deeper and longer-lasting effects. Non-Asian emerging markets stand out for their vulnerability. We show that no country is immune to the economic fallout of the pandemic because of global interconnections as evidenced by the case of Sweden. We also find that long-term interest rates could temporarily fall below their pre-Covid-19 lows in core advanced economies, but this does not seem to be the case in emerging markets.