Housing prices are of crucial importance in financial stability management. The severe financial crises that originated in the housing market in the US and subsequently spread throughout the world highlighted the crucial role that the housing market plays in preserving financial stability. After the severe housing market crash, many financial institutions in the US suffered from high default rates, severe liquidity shortages, and even bankruptcy. Against this background, researchers have sought to use econometric models to capture and forecast prices of homes. Available empirical research indicates that nonlinear models may be suitable for modelling price cycles. Accordingly, this thesis focuses primarily on using nonlinear models to empirically investigate cyclical patterns in housing prices. More specifically, the content of this thesis can be summarised in three essays which complement the existing literature on price modelling by using nonlinear models. The first essay contributes to the literature by testing the ability of regime switching models to capture and forecast house prices. The second essay examines the impact of banking factors on house price fluctuations. To account for house price characteristics, the regime switching model and generalised autoregressive conditionally heteroscedastic (GARCH) in-mean model have been used. The final essay investigates the effect of structural breaks on the unit root test and shows that a time-varying GARCH in-mean model can be used to estimate the housing price cycle in the UK.

This dissertation studies the effects of credit availability on firm-level outcomes using a new matched employer-employee panel of Chilean firms that also includes firm-bank lending and tax data. In Chapter I, using a natural experiment and a differences in differences approach, I show that firms that experienced a positive credit supply shock during the 2008-09 recession in Chile, exhibit higher labor productivity four years after the shock, even after aggregate demand and credit supply have fully recovered. Chapter II presents evidence consistent with the hypothesis that at least part of the productivity improvement is due to an increased ability of firms with access to credit to adjust labor during the recession. In particular, I find that these firms exhibit larger worker flows and use credit to adjust employment by churning more workers. Chapter III studies a government partial credit guarantee scheme for bank loans to small and medium sized enterprises using a regression discontinuity design around the threshold for eligibility. I show that the program has a large positive causal effect on firms' total borrowing, and the effect is persistent. Moreover, firms that obtain bank loans through this scheme can borrow more from loans not insured by the guarantee, which means that the program has a positive effect on the firms's total borrowing capacity. Finally, the program also helps in the formation of new bank-firm lending relationships.

Derivation and Estimation of a New Keynesian Phillips Curve in a Small Open Economy This paper explores how well Swedish inflation is explained by a New Keynesian Phillips Curve. As the real driving variable in the Phillips Curve, a measure of firms' real marginal cost is compared to the traditional output gap. The results show that, with real marginal cost in the Phillips Curve equation, the point estimates generally have the expected positive sign, which is less frequently the case with the output gap. However, with both real marginal cost and the output gap, it is difficult to pin down a statistically significant relationship with inflation. Firm-Level Evidence of Shifts in the Supply of Credit This paper examines empirically whether firms are subject to shifts in credit supply over the business cycle. Shifts in the supply of credit are identified by exploring how firms substitute between commitment credit -- lines of credit -- and non-commitment credit. The results show that firms on average rely more on commitment credits when monetary policy is tight and when the financial health of banks is weaker. The results are consistent with a bank lending channel of monetary policy and with shifts in the supply of credit following deteriorations in banks' balance sheets. Lines of Credit and Investment: Firm-Level Evidence of Real Effects of the Financial Crisis This paper studies how the 2008 financial crisis affected corporate investment in Sweden through its effect on credit availability. The approach is to compare investments of firms before and after the onset of the crisis as a function of their ex ante sensitivity to a credit supply shock, controlling for fundamental determinants of investments. Sensitivity to a credit supply shock is measured as credit reserves, defined as unused credit on lines of credit. The results indicate that the decline in investment following the crisis was not exacerbated by a contraction in the supply of credit.

This thesis examines the subprime crisis in a Kindleberger framework as well as how the major banks in Sweden were affected. The thesis ties different events to the framework of Kindleberger and follows the stages he sees in a financial crisis, from the origination of the crisis due to speculation to suggested structural changes in the financial market. The effects upon Swedish banks are followed through the crisis and the effects upon the banks. Conclusions drawn are that the Kindleberger model is applicable to the subprime crisis in terms of components and not always chronologically. Swedish banks have regarding the magnitude of the crisis faired well, the problems causing the crisis are related to Moral hazard problems, regulators and rating institution.

I Sverige klassificeras cirka 99,4 % av alla företag som mindre företag och under 2014 registrerades cirka 70 000 nya företag. Gemensamt är att nystartade och mindre företag som växer och utvecklas bidrar till nationell tillväxt i länderna de är verksamma inom. För att företagen ska kunna växa krävs finansiering och banker har traditionellt tillgodosett detta behov. Regelverket Basel III är därför väldiskuterat eftersom flera studier visar att det kan påverka bankers kreditgivning. Forskning visar bland annat att Basel III leder till minskad utlåning och ökade utlåningsräntor. Det visar också att nystartade företag kan missgynnas mer än andra bolag på grund av de interna riskklassificeringssystem som tillåts inom regelverket. Interna riskklassificeringssystem kan nämligen, på grund av olika variabler och parametrar, göra att nystartade företag betraktas som mer riskfyllda. Andra studier som gjorts i ämnet visar att Basel III inte påverkar varken banker, kreditgivning eller utlåningsräntor. Eftersom tidigare forskning och litteratur visar olika resultat syftar denna studie till att undersöka, beskriva och öka förståelsen för hur Basel III påverkat kreditgivningen till nystartade företag i Sverige. För att få empiriskt underlag till studien har tio intervjuer gjorts med elva respondenter från sju olika banker. Intervjuer har gjorts med anställda på större och mindre banker på central och lokal nivå. Resultatet i studien visar att alla banker höjt utlåningsräntorna till nystartade företag. Bankerna uppger att det framför allt beror på förändrad risksyn och riskbedömning till följd av Basel III. Basel III har lett till att företagskunder prissätts mer efter bedömd kreditrisk och detta har gjort att nystartade företag generellt fått en högre ränta. Resultatet visar också att interna system och modeller blivit viktigare inom bankerna och att alternativa finansieringslösningar börjat växa fram på marknaden. Samtidigt är kreditbedömningsprocessen och låneutbudet oförändrat sedan Basel III:s introduktion. Studiens resultat bidrar med praktiska implikationer till nystartade företag, banker, entreprenörer och samhället. Den bidrar också teoretiskt till forskningen i form av underlag till diskussionen om utlåningsräntor och låneutbud. / In Sweden approximately 99.4% of all companies are classified as small companies and in 2014 around 70,000 new companies were registered. The common denominator is that start-ups and small businesses that grow and evolve contribute to national growth in the countries they operate in. In order to enable businesses to grow they require finance and traditionally banks have met this need. Basel III is therefore a well-argued subject since several studies show that it can affect banks' lending. Research shows that Basel III will lead to reduced lending and increased lending rates. It also shows that start-ups may be more disadvantaged than other companies because of the internal ratings-based (IRB) approach allowed within the regulation. The IRB approach can namely, because of different variables and parameters, consider start-ups more risky than other companies. Other studies however, show that Basel III has no, or very little, impact on lending and interest rates. Since previous research and literature shows different results this study aims to examine, describe and increase the understanding of how Basel III impact lending to start-ups in Sweden. Ten interviews with eleven respondents from seven different banks have been conducted. The interviews were conducted with employees of large and small banks working on central and local level. The results of the study show that all banks have raised lending rates to start-ups. The banks say that it is mainly due to changed risk profile and risk assessment as a result of Basel III. Basel III has led to corporates, retails and start-ups being priced on estimated credit risk and this has led to start-ups being considered as riskier. Thus, banks have raised lending rates to start-ups. The result also shows that internal systems and models have become more important in banks and that alternative financing has begun to emerge on the market. Meanwhile, the credit assessment process and the loan supply are unaffected since Basel III's introduction. The study's results contribute with practical implications for start-ups, banks, entrepreneurs and the community. It also contributes to theoretical research regarding the lending rates and loan supply discussion.

This thesis examines three different aspects of monetary policy in a varying sample of developing countries, with some Islamic banks. The first essay estimates a variety of interest rate rules for the conduct of monetary policy for Indonesia, Israel, South Korea, Thailand and Turkey, in both high and low inflation conditions. The findings are that the reaction of monetary policy to both inflation and output gaps differs between the high and low inflation regimes and that the exchange rate channel is important only in the low inflation regime. The second essay examines the bank lending channel of monetary transmission in Malaysia, a country with a dual banking system, with both Islamic and conventional banks. The results show that Islamic credit is less responsive to interest rates shocks than is conventional credit, in both high and low growth conditions. In contrast, the relative importance of Islamic credit shocks in driving output and inflation is greater under low -inflation conditions and higher Islamic credit leads to higher growth and lower inflation in such conditions. The third essay re-examines the question of causality between credit and GDP between two sets of countries one set without Islamic banks and the other set with dual banking systems, including some Islamic banks. The results suggest long-run causality from credit growth to GDP in countries with only Islamic banks.

Thesis advisor: Fabio Schiantarelli / Thesis advisor: Zhijie Xiao / This dissertation consists of three essays in macroeconomics and finance. The first and second chapters analyze the impact of the financial shocks and anti-corruption campaign on Chinese firms through the bank lending channel. The third chapter provides a new method to predict the cash flow from operations (CFO) via semi-parametric estimation and machine learning. The first chapter explores the impact of the financial crisis and sovereign debt crisis on Chinese firms through the bank lending channel and firm borrowing channel. Using new data linking Chinese firms to their bank(s) and four different measurements of exposure to the international markets (international borrowing, importance of lending to foreign listed companies, share of trade settlement, and exchange/income), I find that banks with higher exposure to the international markets cut lending more during the recent financial crisis. In addition, state-owned bank loans are more pro-cyclical compared with private bank loans. Moreover, banks with higher exposure to the international markets cut lending more when there is a negative shock in OECD GDP growth. With regard to firm borrowing channel, I find that firms with higher weighted aggregate exposure to the international markets through banks have lower net debt, cash, employment, and capital investment during the financial crisis. Firms with higher weighted aggregate exposure to the global markets have higher net debt and lower cash, employment, and capital investment when there is a negative shock in OECD GDP growth. This paper also provides a theoretical model to explain the mechanism in a partially opened economy like China. The second chapter discusses the impact of the anti-corruption campaign on Chinese firms through the bank lending channel. Using confidential data linking Chinese firms to their bank(s) and prefecture-level corruption index, I find that banks located in more corrupted prefectures offer significantly less credits before the anti-corruption investigation, and this effect changes the direction after the investigation. Moreover, banks located in more corrupted prefectures tend to use higher interest rates, longer maturity, and more collateral before the campaign, all of these effects change the direction after the campaign. This paper suggests that the banks located in more corrupted prefectures have stronger monopoly power (or higher markup, and lower efficiency). This monopoly effect could be proved by that the bank concentration ratio is higher, and the bad loans of the banks are higher in the more corrupted areas, and all of these effects disappear after the campaign. The third chapter considers the methods of prediction of Cash flow from operations (CFO). Forecasting CFO is an essential topic in financial econometrics and empirical accounting. It impacts a variety of economic decisions, including valuation methodologies employing discounted cash flows, distress prediction, risk assessment, the accuracy of credit-rating predictions, and the provision of value-relevant information to security markets. Existing literature on statistically-based cash-flow prediction has pursued cross-sectional versus time-series estimation procedures in a mutually exclusive fashion. Cumulated empirical evidence indicates that the beta value varies across firms of different sizes, and the cross-sectional regression can not capture an idiosyncratic beta. However, although a time series based predictive model has the advantage of allowing for firm-specific variability in beta, it requires a long enough time series data. In this paper, we extend the literature on statistically-based, cash-flow prediction models by introducing an estimation procedure that, in essence, combine the favorable attributes of both cross-sectional estimation via the use of "local" cross-sectional data for firms of similar size and time-series estimation via the capturing of firm-specific variability in the beta parameters for the independent variables. The local learning approach assumes no a priori knowledge on the constancy of the beta coefficient. It allows the information about coefficients to be represented by only a subset of observations. This feature is particularly relevant in the CFO model, where the beta values are only related to cross-sectional data information that is "local" to its size. We provide empirical evidence that the prediction of cash flows from operations is enhanced by jointly adopting features specific to both cross-sectional and time-series modeling simultaneously. / Thesis (PhD) — Boston College, 2020. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Foreign Banks and Financial Development - Foreign Bank Lending in CEE Countries Master thesis Anja Köthe Abstract The objective of this paper is to investigate the relation between foreign banks and financial development and to focus on foreign bank lending, in particular. The research focuses on four countries with a high share of foreign banks: Czech Republic, Hungary, Poland and Slovakia. Using a dataset of 122 banks over a 10 year period from 2005 to 2015 a fixed effects panel regression models is used for an empirical analysis. Loan growth as a proxy for lending behaviour and credit stability is used as the dependent variable. The empirical models investigate the determinants of loan growth in foreign and domestic banks as well as the dependence of foreign bank subsidiaries on their parent banks. The regression results indicate that domestic banks are more dependent on local economic conditions and bank performance. Their credit supply depends more on their profitability, loan quality and domestic market share. Foreign bank subsidiaries, in contrast, exhibit greater independence from local economic conditions and also from subsidiary performance indicators such as profitability ratios. Instead their lending behaviour is significantly influenced by the financial characteristics of their parent banks.

Similar development of economic fundamentals in Germany over the last two decades did not lead to the same dramatic house price increases as it is in Sweden. What can explain this house price stability over a long period? This thesis attempts to find the answer this question. The first paper in this thesis contains an extended literature review on the studies focused on the factors affecting house prices in the short and in the long run. Existing literature adopts a broad variation of approaches and reaches different conclusions attempting to answer the question about what are the key drivers of house prices. Conclusions often depend on the model specifications and econometric methods applied. Though there is a considerable agreement in real estate economics theory regarding the main factors that affect house prices (or so called “fundamental determinants”), it is hard to find a consistent definition regarding what factors can be considered as “fundamentals” and what factors belong to “non-fundamentals”. The dominating factors that are presented in the majority of the studies are income, population, interest rate, housing stock and unemployment. Studies done after the recent financial crisis put more attention on such factors as the behavior of the market participants, financing conditions and regulations. The characteristics of the bank lending and valuation policies as well as regulations on the rental market have received attention in the research literature, but the impact of these factors on house price dynamics is not measured and not well described. Therefore the other two papers in this thesis aim to provide a better insight in to the factors that create fluctuations in housing markets. The second paper investigates the effects of macroeconomic indicators such as population, income housing stock, mortgage interest rate on house prices. Estimation is done by applying panel data methodology on regional data for major cities in Germany and Sweden and by using yearly observations from 1995 to 2010. Results suggest that the long-run development of apartment prices in Sweden can be explained by changes in such factors as population, disposable income per capita, mortgage interest rate, housing stock, and prices per square meter in the previous period. The price for the previous period has the highest impact in comparison with other factors in Sweden. At the same time for Germany this is the only factor that is valid for long-term house price development. Estimates for fundamental factors such as population, disposable income, mortgage interest rate and housing stock appeared as not significant in house price development in the long run in Germany. A closer analysis has shown that the fundamental factors developed in a similar way in both countries during the analyzed period, though the house prices dynamic is very different. The conclusion is that fundamental factors cannot provide an explanation for the differences in house price developments in two countries and further analysis of institutional differences in the housing markets is done in the third paper. Third paper applies a comparative analysis approach and hypothetico-deductive method in order to examine the differences in the banking policies on mortgage financing and approaches to valuation of mortgage properties in Germany and Sweden.  The results suggest that the extreme rise in Swedish house prices above the long-term trend was created by expanding bank lending policies that was supported by the general macroeconomic factors and regulation environment on the housing market. The main difference between countries in approaches to valuation for mortgage purposes is that in Germany that mortgage is based not on the market value as it is in Sweden, but on the long-run sustainable value, so called “fundamental” value. Mortgage lending value is determined in such a way that is also develops in the same tempo as fundamentals in the long-run and is not that procyclical as market value. Using a long-term sustainable value has a restrictive effect on the housing prices and in such a way stabilizes the market.  One more factor that gives stability to the housing market in Germany is the well-functioning rental market. Third paper contributes to a better understanding of necessary conditions for the house prices to rise in the long run above the fundamentals level and suggests policy solutions that can reduce the risks of housing bubbles and increase financial stability. / Ekonomiska fundamenta hur utvecklats på ungefär samma sätt i Tyskland och Sverige, men medan huspriserna i Sverige stigit kraftigt har de varit stabila i Tyskland. Vad kan förklara denna skillnad? Syftet med denna licentiatuppsats är att försöka förklara det. Den första uppsatsen innehåller en omfattande litteraturöversikt rörande vad som styr huspriser på kort och lång sikt. Den existerande litteraturen innehåller många olika angreppssätt och kommer till olika svar om vad som driver huspriserna. Slutsatserna beror ofta på hur modellerna specificerats och vilken ekonometrisk metod som använts. Det finns dock betydande enighet i ekonomisk teori om vad som är de grundläggande faktorerna som styr huspriserna (så kallade fundamenta) så finns delade meningar om hur dessa exakt ska specificeras och vad som räknas som icke-fundamentala faktorer. De vanligaste fundamentala faktorerna i studierna är inkomst, befolkning, räntenivå, bostadsutbudet och arbetslöshet. Studier gjorda efter den senaste finanskrisen betonar med beteendefaktorer, finansieringsförhållande och regleringar. Egenskaperna hos bankernas långivning och värderingsprinciper liksom effekten av hur hyresmarknaden fungerar har då fått lite utrymme vilket motiverar att de behandlas mer ingående i denna studie. Den andra uppsatsen undersöker effekterna av makroekonomiska indikatorer som befolkning, inkomst, bostadsutbud och räntenivåer på huspriser i Tyskland och Sverige. Studien begränsas till ett antal större städer och bygger på data från 1995-2010. Paneldataanalys används. Resultaten pekar på att den långsiktiga prisutvecklingen i Sverige kan förklaras av sådana fundamentala faktorer, men också att priset föregående period påverkar priset perioden efter. För Tyskland är enbart den sista faktorn av betydelse, dvs utvecklingen av de fundamentala faktorerna påverkar inte prisutvecklingen där. Trots att de fundamentala faktorerna utvecklas på liknande sätt så leder de inte till samma utveckling av huspriserna. Detta motiverar djupare studier av institutionella skillnader mellan bostadsmarknaderna i de båda länderna. Den tredje uppsatsen är en jämförande studie som använder hypotetiskt deduktiv metod för att undersöka om skillnader i bankerna lånepolicy och skillnader i värdebegrepp kan förklara skillnader i prisutveckling på bostäder. Resultaten pekar på att de snabbt stigande priserna i Sverige kan förklaras med en expansiv långivning. En viktig skillnad är att medan långivning i Sverige grundas på aktuellt marknadsvärde medan den i Tyskland bygger på ett långsiktigt värde som ska spegla långsiktiga fundamentala faktorer, ett så kallat "mortgage lending value". Detta värde utvecklas mer sakta och ska inte svänga med konjunkturerna på det sätt som ett marknadsvärde normalt gör. Genom att långivning grundas på detta värde stabiliseras marknaden. En annan faktor som bidrar till att stabilisera de tyska bostadspriserna är att det finns en fungerande hyresmarknad som skapar ett alternativ till att köpa. Bidraget i den tredje uppsatsen är att öka vår förståelse av nödvändiga villkor för att huspriserna inte ska stiga snabbt och att den pekar på åtgärder som kan minska risken för prisbubblor på bostadsmarknaden, och minska risken för finansiell instabilitet. / <p>QC 20150316</p>

In this study I investigate the impact that operating in specific foreign countries has on the bank loan contracts of multinational companies. While previous research has shown that increased firm globalization leads to a lower cost of bank debt, I find that this relationship is attenuated when firms operate in countries with certain institutional attributes. Using income levels, creditor rights, and property rights as institutional indices, I test the association of country-level factors with the priced and non-priced components of bank loan contracts. I find that globalized firms operating in low income countries, countries with weak creditor rights, or countries with weak property rights do not receive the same positive debt contracting features as do firms operating in high income countries, countries with strong creditor rights, or countries with strong property rights. / Ph. D.