Essays in Macro-finance and Political Economy

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In the chapters that follow, I present three empirical studies in which I utilize natural experiments in combination with a consideration of institutional frictions to analyze topics related to macro-finance and political economy. The three chapters touch on a disparate array of topics, united by a few common threads. In each study I seek to make a case for causal identification via the quasi-random assignment of some economic variable. In addition, each study explores some feature of the political or regulatory environment, and uses policy frictions as tools for generating this exogenous variation. Two of my studies touch on topics broadly related to macro-finance. In these first two chapters, I utilize frictions introduced by economic regulations to study monetary policy and financial stability. In my final chapter, I take interest in the political process itself, and the incentives that it creates for political actors who award contracts to firms, and grants to state and local governments. In my first chapter, I study online-based “fintech” lenders in residential mortgage markets and I explore how their development of new technology has affected the transmission of monetary policy. I hypothesize that the proliferation of fintech lenders over the last decade has made it easier for borrowers to refinance their mortgages, particularly during periods of monetary easing, when interest rates are falling and borrowers have the strongest refinance incentives. For identification, I make use of the fact that the certification of non-bank lenders in the United States takes place at the state level, and I show that as new fintech firms entered the market and began to expand in the early 2010’s, they gravitated toward states with the least restrictive requirements for licensing new non-bank lenders. I compare mortgage refinancing behavior across neighboring states with different levels of regulatory strictness and show that states with faster fintech entry saw stronger mortgage refinancing. I present additional evidence suggesting that stronger refinancing, amidst falling interest rates, allows for stronger consumption in counties with a substantial fintech presence. I show that this amplification of stimulative interest rate policy is strongest in counties that are underserved by the traditional banking system. In my second chapter, I study so-called “credit booms.” Prior literature has shown an empirical relationship between rapid credit growth (relative to GDP) and a number of adverse economic outcomes. In order to isolate exogenous variation in credit growth, I study a set of policies called “credit ceilings” across an international panel of countries. Credit ceilings were implemented in these countries in the years after WWII and restricted the rate at which banks could extend new loans. As these countries modernized their monetary policies, they removed these credit ceilings. I show that aggregate credit grows sharply after these ceilings are removed, and I use ceiling removals as an instrument for credit growth in a linear-projections with instrumental variables (LPIV) setting to study the effects of credit growth on a number of macroeconomic and financial outcomes. I find that rapid credit growth is often accompanied by GDP and asset price growth in the short-run with sharp reversals in the medium-run, and often financial crises. In my final chapter, I shift to a political economy setting, and again analyze incentives that underlie government policies. I ask whether the Electoral College system for conducting presidential elections in the United States creates incentives for policymakers to shift government funds to politically important regions of the country. I analyze federal government expenditures awarded to firms, local governments, and other agencies and assess whether government funds are disproportionately directed either toward politically important battleground states, or to states that strongly support the sitting president’s political party. My approach centers on comparisons of spending in counties located next to one another on opposite sides of adjacent state borders. Using this approach, I find evidence suggesting that states which strongly support the winning candidate in an election receive more funding than states which voted for the losing candidate. I also find evidence suggesting that federal funds are directed toward politically important battleground states, particularly in an election year.

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229 pages


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Credit Ceilings; Financial Crises; Fintech; Monetary Policy; Mortgage Lending


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Baron, Matthew

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Sethuraman, Mani
Campello, Murillo
Murfin, Justin

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Ph. D., Management

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Doctor of Philosophy

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Government Document




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dissertation or thesis

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