Research
Research
What is the impact of capital inflows on advanced economies? I study this question in the context of the “global savings glut”, which was associated with large capital inflows to the United States. Using regional variation in banks’ exposure to global funding markets, I show that a widening of U.S. current account deficits induces a sectoral reallocation of resources from tradable to non-tradable industries, causing a decline in manufacturing employment. This reallocation results from banks intermediating capital inflows to domestic households, financing a credit-fueled consumption boom that shifts resources to the production of local goods. Banks more exposed to capital inflows further amplify this reallocation by cutting back industrial lending in favor of issuing more debt to households. The role of the global savings glut I document is distinct and complementary to the effects of import competition on manufacturing employment (often referred to as the “China shock”).
with Atif Mian, Karsten Müller and Amir Sufi
What are the origins of sovereign debt crises? We document a prominent role for expansions in credit supply by internationally active banks in the context of a canonical case study: the Less Developed Country (LDC) crises of the 1980s. Using a newly-digitized historical loan-level dataset, we show that banks exposed to the Eurodollar market and inflows of oil receipts from foreign governments increased their supply of credit during the 1970s. Following the Mexican default in 1982, these banks contracted lending and faced severe losses. Countries more exposed to loan inflows from global banks experienced a compression of spreads during the boom, followed by painful recessions and sovereign debt crises during the bust. Taken together, our findings highlight how a credit supply shock to global banks can translate into boom-bust cycles in faraway places and ultimately sow the seeds of sovereign default.
with Fabian Eckert, Ka-leung Lam, Atif Mian, Karsten Müller and Amir Sufi
The County Business Pattern (“CBP”) files contain employment and establishment counts for detailed industry codes covering all counties in the United States. The contribution of this project is to digitize, clean, and prepare the CBP files from 1946-1974. We also apply the methods developed in Eckert, Fort, Schott, and Yang (2020a) to impute missing employment observations in the raw data. We provide three digital data products for public use: (1) the cleaned CBP files for each year, (2) a consolidated panel data set of employment and establishment counts for about 20 industries and all US counties, (3) estimates for suppressed employment counts for each year.