Gilbert Cette - Comments on three papers
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Transcript of Gilbert Cette - Comments on three papers
Comments on three papers
Session 2: Financial frictions and within firm performance
BIS-IMF-OECD Joint Conference Weak productivity: The role of financial factors and policies 10-11 January 2018 OECD, Paris Gilbert Cette Banque de France Université d’Aix-Marseille
Content
2
1. Three papers Paper from Romain Duval Gee H. Hong and Yannick Timmer (DHT) Paper from Manarasi and Pierri (MP) Paper from Reint Gropp, Joerg Rocholl and Vahid Saadi (GRS)
2. Two questions 3. Two opposite impacts of financial constraints 4. Financial constraint impact at country level
1. Three papers
3
- Romain Duval Gee H. Hong and Yannick Timmer (DHT thereafter) « Financial Frictions and the Great Productivity Slowdown » - Francesco Manarasi and Nicola Pierri (MP thereafter) « Credit Supply and Firm Productivity Growth » - Reint Gropp, Joerg Rocholl and Vahid Saadi (GRS thereafter) « The Cleansing Effect of Banking Crisis » The three papers are empirical They deal with the topic of the productivity impact of financial constraints Three very interesting and thought- provoking papers Robust but contrasted results
1. Three papers Paper from Romain Duval, Gee Hong and Yannick Timmer (DHT)
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The approach
oMultinational firm level data (ORBIS), 11 advanced economies oCompares productivity growth change from 6 years before to 6 years after
the 2008 financial crisis oOriginal financial vulnerability measurement: share of debt prior to the
crisis that was scheduled to mature during the crisis Main results
oHigher financial vulnerability -> larger TFP slowdown oLarger TFP decline for firms facing a more severe tightening of credit
conditions (ΔCDS from 7 days before to 7 days after LB collapse, country and firm/bank level)
oThrough (at least partly) intangible capital investment Takeaway
oTFP detrimental impact of financial constraints oCould have contributed to post crisis TFP slowdown
1. Three papers Paper from Francesco Manarasi and Nicola Pierri (MP)
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The approach
o Italian firm/bank level data, over 1997-2013 oEstimates impact of credit supply shocks on TFP growth oOriginal credit supply shock using 2007-2009 interbank market freeze
Main results
oCredit crunch -> TFP slowdown oLarger TFP decline for firms with larger debt oLarger TFP decline if banks are more exposed to interbank market freeze oDifferent channels: IT investment, innovation, management practices…
Takeaway
oTFP detrimental impact of financial constraints oCould have contributed to post crisis TFP slowdown
1. Three papers Paper from Reint Gropp, Joerg Rocholl and Vahid Saadi (GRS)
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The approach
oUS metropolitan statistical areas (MSA) data – about 260 MSA – 2007-2014 oOriginal credit constrainst measurement: regulatory forbearance on
distressed banks during the crisis oOriginal instrument: distance from Washington DC oEstimates impact of credit constraints during the crisis (2007-2009) on
. Firm cleansing and job destruction during the crisis
. Firm creation and employment creation after the crisis (2010-2014) Main results
oMore credit constraints during the crisis -> larger cleansing and more job destruction during the crisis -> more firm and employment creation after the crisis -> higher productivity growth after the crisis
Takeaway
oTFP favorable impact of financial constraints
2. Two questions
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Results apparently contrasted
oPaper DHT and MP: TFP detrimental impact of financial constraints Through IT investment, R&D, innovation, management… oPaper GRS: TFP favorable impact of financial constraints Through cleansing mechanisms, and consequently factor allocation Who to believe and do we have to choose?
If the two mecanisms coexist, which one dominates at the macro level?
+ +
?
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Financial
constraints
cleansing
mechanisms
Incumbent
firm
productivity
Global
productivity
growth
3. Two opposite impacts of financial constraints
8
Large research program at the Banque de France, on these questions
Both on firm level, industry level and country level data On firm and industry level data
P. Aghion, A. Bergeaud, G. Cette, R. Lecat and H. Manghin (ABCLM) oThe two types of impact of financial constraints appear significant on firm
level data . Cleansing mechanisms: positive impact on productivity . Incumbent firms: negative impact on productivity
oFrom this, non-linear productivity global impact of financial constraints on industry level data
3. Two opposite impacts of financial constraints
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On firm and industry level data (ABCLM)
Productivity impact of financial constraints at the industry level: An inversed U curve
3. Two opposite impacts of financial constraints
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On firm and industry level data (ABCLM)
Productivity impact of financial constraints at the industry level: An inversed U curve From high financial dependence industries
Estimate results, 17 industries over 2003-2014
4. The financial constraint impact at the country level
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On country level data
A. Bergeaud, G. Cette and R. Lecat (BCL) oCircular relation between TFP growth and real interest rates
. Real interest rates + factor quality + (institutions, technology) => TFP growth Consistent with an abundant literature, see among numerous papers G. Cette, J. Fernald and B. Mojon (2016)
. TFP growth + other factors (demography …) => GDP growth => real interest rates Consistent with a abundant literature, see among numerous papers M. Marx, B. Mojon and F. Velde (2017)
oWithout technology shocks and adapted institutions, risk of Secular Stagnation
4. The financial constraint impact at the country level
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On country level data (BCL)
o Long term TFP slowdown in all areas
Average annual growth rate of TFP (In %) Smoothed indicator (HP filter, λ = 500) - Whole economy Source: Bergeaud, Cette and Lecat (2016), www.longtermproductivity.com
4. The financial constraint impact at the country level
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On country level data (BCL)
o Long term real interest rate decline in all areas
Real long-term interest rate (In %) - 10-year sovereign bonds Source: OECD
4. Financial constraint impact at country level
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On country level data (BCL)
oCircular relation between TFP growth and real interest rate oCleansing mechanisms dominate Estimate results on 17 countries and annual data over 1950-2016 (control variables omitted)
Explained variable XPGF TXR XPGF TXR
Method Arellano-Bond Lewbel
∆𝒑𝒈𝒇𝒕−𝟏 0.266***
0.279***
[0.049]
[0.047]
∆𝒑𝒈𝒇𝒕 0.061
0.304**
[0.059]
[0.144]
𝑻𝑿𝑹𝒕 0.089***
0.138***
[0.024]
[0.032]
𝑻𝑿𝑹𝒕−𝟏
0.682***
0.653***
[0.052]
[0.044]
4. Financial constraint impact at country level
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On French firm level data
oThe global productivity slowdown comes from a growing productivity level dispersion between firms, itself coming from lower cleansing
French firm productivity level inter-decile and inter-quartile dispersion (D9-D1)/(D9+D1) and (Q3-Q1)/(Q3+Q1) G. Cette, S. Corde and R. Lecat (2017) (CCL)