Working Papers: Banking, Corporate Finance, and Macroeconomics

  1. Financial Constraints and the Transmission of Monetary Policy: Evidence from Relaxation of Collateral Constraints (solo-authored)

    2. Revise & Resubmit at the Journal of Financial Economics This paper was previously circulated under the title "What does Financial Heterogeneity Say about the Transmission of Monetary Policy?"

    [+]Abstract

    Abstract: How do financial constraints affect the transmission of monetary policy? I examine this question using the staggered enactment of anti-recharacterization legislation as a source of exogenous variation in creditor rights that loosens firm-financial constraints. A 25 basis-point expansionary monetary policy shock results in a 2 percentage-point higher investment growth among treated (unconstrained) firms. Using a Heterogeneous-Firm-New-Keynesian model, I estimate that the law relaxed firm collateral constraint by 13%. The model highlights the mechanism that the relaxation of collateral constraint flattens the firm marginal cost curve, which amplifies responses to shifts in the marginal benefit curve due to monetary policy shocks.


    • Presentations: Summer Research Conference 2020 at the Indian School of Business, CMI Field Workshop on Firm Finance/Behaviour 2020, the Economic Dynamics and Financial Markets Working Group, Finance Brownbag seminar at the University of Chicago


  2. Banking Networks and Economic Growth: From Idiosyncratic Shocks to Aggregate Fluctuations with Shohini Kundu

    3. Revise & Resubmit at the American Economic Journal: Macroeconomics

    [+]Abstract

    Abstract: This paper explores the transmission of non-capital shocks through banking networks. We construct non-capital (idiosyncratic) shocks, using labor productivity shocks to large firms. We document a change in the relationship between foreign idiosyncratic shocks and domestic economic growth between 1978 and 2000. Contemporaneous changes in banking integration drive this phenomenon as geographically diversified banks divert funds away from economies experiencing negative shocks towards other unaffected economies. Our granular-IV estimates suggest that a 1% increase in bank loan supply is associated with a 0.06-0.25 pp increase in economic growth. Lastly, this can potentially explain the Great Moderation.


    • Presentations: 16th Macro Finance Society Workshop 2020, OFR Ph.D. Symposium on Financial Stability 2020, 5th Empirics and Methods in Economics Conference (EMCON) 2020, Young Economist Symposium 2020, Chicago Finance Brownbag Seminar, Midwestern Finance Association Meeting 2021, CEPR’s Endless Summer Conference on Financial Intermediation and Corporate Finance, Chicago Economic Dynamics and Financial Markets Working Group, UCLA Macro-finance Seminar


    • Media: UCLA Anderson Review


  3. The Geography of Bank Deposits and the Origins of Aggregate Fluctuations with Shohini Kundu & Seongjin Park
    4. [+]Abstract

    Abstract: What are the aggregate effects of deposit shocks? We introduce a new fact regarding the within-bank geographic concentration of deposits -- 30% of deposits are concentrated in a single county. We construct deposit shocks by combining the within-bank deposit concentration with local natural disasters. We show that large shocks to deposit concentrated areas amplify through bank internal capital markets and generate aggregate fluctuations. Deposit shocks explain 3.30% of variation in economic growth. We identify the deposit elasticity of economic growth as 0.87 and the money multiplier as 1.18. Lender and borrower-side frictions are critical for the aggregation of local shocks.


    • Presentations: IWH-FIN-FIRE Workshop on Challenges to Financial Stability, Bank of Finland Workshop on Banking and Institutions, Federal Reserve Board Summer Workshop in Money, Banking, Payments and Finance, Qatar Centre for Global Banking and Finance Conference, Columbia University/Bank Policy Institute Research Conference, HEC Paris – CEPR Conference on Banking, Finance, Macroeconomics and the Real Economy, Copenhagen Business School, SFS Cavalcade, RiskLab/BoF/ESRB Conference on Systemic Risk Analytics, Advances in Macro-Finance Tepper-LAEF Conference, OCC Symposium on Systemic Risk and Stress Testing in Banking, UCLA Finance Brownbag Seminar, Chicago Finance Brownbag Seminar, Transatlantic Doctoral Conference at London Business School, the 20th FDIC Bank Research Conference, the Inter-finance PhD Seminar, PhD Student Symposium on Financial Market Research and Policy Developments


Working Papers: Finance & Development

  1. Political Voice and (Mortgage) Market Participation: Evidence from the Dilution of Voting Rights Act with Seongjin Park & Arkodipta Sarkar

    2. Revise & Resubmit at the Journal of Financial Economics

    [+]Abstract

    Abstract: Using US Supreme Court’s narrow-decision on Shelby v. Holder as a shock that diluted voting rights of Black Americans, we document the relationship between political voice and economic decision-making. We find de-facto disenfranchisement leads to decline in mortgage origination for Black Americans, primarily driven by reduced applications. Additionally, we observe a flight of Black applications to Black lenders, indicating an increase in racial homophily. The findings suggest that disenfranchisement can lead to exclusion from markets and exacerbate racial homeownership gaps. Leveraging individual-level survey data, we show trust in government and financial institutions plays a significant role in driving these effects.


    • Presentations: 2022 Meeting of the American Finance Association, ISB-CAF Summer Research Conference 2021, Chicago Booth PhD Brownbag, 2021 Trans-Atlantic Doctoral Conference, Asia-Pacific Corporate Finance Online Workshop, CUHK greater bay area conference, Misra Centre for Financial Markets and Economy (IIM Ahmedabad), Conference on Financial Economics and Accounting 2021


  2. Safety Nets, Credit, and Investment: Evidence from a Guaranteed Income Program with Pulak Ghosh
    3. [+]Abstract

    Abstract: Do safety nets affect investment? If so, how? Combining a natural experiment that gives guaranteed income to landowning farmers in India with transaction-level bank data and loan-level credit bureau data, we evaluate the impact of unconditional and perpetual guaranteed income on small farmer entrepreneurs. We find that $1 of guaranteed income each year increases income by an additional $1.7. We then study the mechanisms behind this effect. We find that instead of reducing ambition and initiative, guaranteed income allows recipients to work differently. Guaranteed income provides protection against downside risk, which increases demand for credit and allows farmers to invest in a more capital-intensive mode of production. We estimate that a $1 guaranteed income each year increases credit by $15.7. Survey evidence suggests that guaranteed income increases credit demand by reducing the probability and severity of financial distress. Our results indicate that the uninsured risk inherent in an entrepreneurial venture may be a binding demand-side constraint inhibiting growth. The availability of basic income support increases entrepreneurs' risk-bearing ability and significantly improves their credit demand and production activity.


    • Presentations: NBER Entrepreneurship Working Group Fall 2022, 18th Annual Conference on Corporate Finance at Washington University in St. Louis, Financial Research Association (FRA) Conference, NBER-ISB conference on Entrepreneurship, Public Policy, and Economic Outcomes, Webinar series in Finance and Development (WEFIDEV), 2022 Chicago-area Entrepreneurship Workshop, Stigler Center Workshop, Inter-Finance PhD Seminar, Chicago Brownbag Seminar


    • Media: Ideas of India


  3. Political Power-Sharing, Firm Entry, and Economic Growth: Evidence from Multiple Elected Representatives with Harsha Dutta, Pulak Ghosh & Arkodipta Sarkar
    4. [+]Abstract

    Abstract: We examine the effect of political power-sharing on local economic activity by exploiting quasi-random variation in the number of politicians governing adjacent regions. We utilize haphazard overlap of electoral and administrative boundaries in India. This allows us to exploit geographic discontinuity across boundaries separating single and multiple-politician-governed regions, and within-region variation in the number of politicians. We find increasing the number of politicians governing an area leads to new firm creation, lower unemployment, and greater real economic activity. The effect is driven by greater state efficiency, lower regulatory bottlenecks, and reduced cronyism following increased checks and balances among non-aligned politicians.


    • Presentations: BREAD Conference on Development Economics, 100 Years of Economic Development Conference, Chicago Brownbag Seminar, Inter-finance PhD Seminar, HKUST Brownbag Seminar, 2021 NSE-NYU Conference on Indian Capital Markets, National University of Singapore, 2022 Transatlantic Doctoral Conference, Webinar series in Finance and Development (WEFIDEV)


  4. Bridging the Information Gap: Sowing the Seeds of Productivity with High-Speed 4G Internet with Sumit Agarwal, Mohit Desai & Pulak Ghosh
    5. [+]Abstract

    Abstract: Can high-speed internet boost information access and enhance productivity? Combining granular geographic data on the introduction of 4G with remote-sensing data on agricultural productivity, we show that the improvement in information dissemination due to the introduction of 4G leads to an increase in productivity, fertilizer consumption, and credit uptake. Our identification strategy exploiting the staggered state-level introduction of Rights of Way (RoW) policies meant to promote the growth of telecom infrastructure echoes similar results. Overall, we find that six years after the introduction of 4G internet, the annual income of agricultural households grew by 14.5%. Using detailed farmer-level internet-browsing data, we show that the introduction of 4G is related to internet adoption and acquiring agri-related information. Exploiting spatial heterogeneity in the value, reliability and accuracy of information we argue that 4G improves productivity by improving access to information. We document that the decentralized nature of internet-based information access dominates traditional call or text-based information access by circumventing frictions associated with trust in the state. While our results indicate that high-speed internet is an important tool for information dissemination, merely introducing internet infrastructure may not be sufficient. Information that is disseminated must be reliable and valuable, making internet access a complement to information generation.



  5. What Explains Geographic Variation in Corporate Investment? with Shohini Kundu
    6. [+]Abstract

    Abstract: We show that history can explain the geographic concentration of investment over and above traditional agglomerative forces, geography, and expectations. We use spatial variation in direct and indirect British rule in India to identify differences in historical circumstances. Using this within-country variation in historical circumstances, combined with a local identification approach and instrumental variable strategy, we explain the spatial differences in investment. Differences in historical origins can explain 13% of total geographic variation in investment. Moreover, investment is 8-10% lower in direct ruled areas. Our results indicate that history can have long-run consequences through its effect on economic organizations.


    • Presentations: 100 Years of Economic Development Conference, Webinar series in Finance and Development (WEFIDEV), Asian Bureau of Finance and Economic Research (ABFER) Conference, 2021 Transatlantic Doctoral Conference at the London School of Business, 10th European Meeting of the Urban Economic Association, NSE-NYU Conference on Indian Financial Markets, 12th Emerging Markets Conference