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UC Berkeley UC Berkeley Electronic Theses and Dissertations UC Berkeley UC Berkeley Electronic Theses and Dissertations Title Financial Institutions and the Real Economy Permalink https://escholarship.org/uc/item/6bq1q4t7 Author Messer, Todd Publication Date 2021 Peer reviewed|Thesis/dissertation eScholarship.org Powered by the California Digital Library University of California Financial Institutions and the Real Economy by Todd Messer A dissertation submitted in partial satisfaction of the requirements for the degree of Doctor of Philosophy in Economics in the Graduate Division of the University of California, Berkeley Committee in charge: Professor Pierre-Olivier Gourinchas, Chair Professor Christina Romer Associate Professor Benjamin Faber Spring 2021 Financial Institutions and the Real Economy Copyright 2021 by Todd Messer 1 Abstract Financial Institutions and the Real Economy by Todd Messer Doctor of Philosophy in Economics University of California, Berkeley Professor Pierre-Olivier Gourinchas, Chair This dissertation examines the role of financial institutions as they relate to foreign currency payments and financial stability. The first chapter of this dissertation examines how the foreign currency component of international payments can be costly for importers and ex- porters by studying the introduction of a payments system between Brazil and Argentina established in 2008. The second chapter of this dissertation examines the reasons behind short-term funding vulnerabilities of financial institutions by studying Building and Loan Associations in California during the Great Depression. Finally, the last chapter of this dis- sertation studies the COVID-19 pandemic, which is one of the most important public health and economic events of recent history. This chapter studies the effect of stay-at-home orders, enacted to combat the spread of COVID-19, on local labor markets. i ii Contents Contents ii List of Figures iv List of Tables vi 1 Introduction 1 2 Foreign Currency as a Barrier to Trade: Evidence from Brazil 4 2.1 Introduction . 4 2.2 Setting and Institutional Background . 9 2.3 Data Sources . 15 2.4 Causal Evidence from Municipality Data . 17 2.5 Micro Evidence of the SML System . 27 2.6 Discussion . 41 2.7 Conclusion . 47 3 Financial Failures and Depositor Quality: Evidence from Building and Loan Associations 49 3.1 Introduction . 49 3.2 Historical Background . 53 3.3 Data . 61 3.4 Failure Rates . 69 3.5 Costs, Returns, and Lending Rates . 75 3.6 Real Effects . 80 3.7 Conclusion . 82 4 Unemployment Effects of Stay-at-Home Orders: Evidence from High Frequency Claims Data 85 4.1 Introduction . 86 4.2 Data . 89 4.3 Empirical Specification . 91 4.4 Results . 94 iii 4.5 Aggregate Versus Relative Effects . 96 4.6 Alternative Specification: County-Level Employment and Unemployment Ef- fects . 104 4.7 Conclusion . 107 5 Conclusion 114 Bibliography 116 A Appendix to International Payments as a Barrier to Trade: Evidence from Brazil 123 A.1 Data Appendix . 123 A.2 Additional Empirical Results . 125 A.3 Model Appendix . 130 B Appendix to Financial Failures and Depositor Quality: Evidence from Building and Loan Associations 139 B.1 Logit Specification . 139 B.2 Dropping 1929 Closures . 141 B.3 Ordered Logit Specification . 141 B.4 Additional Age Regressions . 142 B.5 Including Federalization . 144 C Appendix to Unemployment Effects of Stay-at-Home Orders: Evidence from High Frequency Claims Data 147 C.1 Additional Empirical Results . 147 C.2 Local SAH Orders in a Currency Union Model . 160 C.3 Data Appendix . 165 iv List of Figures 2.1 Example Transaction . 12 2.2 Example Transaction through the SML system . 13 2.3 Take-up of the SML System . 14 2.4 Map of SML Shares . 19 2.5 Distribution of SML Shares . 20 2.6 Relative Effect of SML Financial Institutions . 23 2.7 Dropping Municipalities with Greater Than 2% Market Share . 26 2.8 BRL Invoicing and SML Usage . 28 2.9 Distribution of BRL Shares of Transactions . 29 2.10 BRL-Invoiced Exports to Argentina . 30 2.11 Argentina ι Shares by Firm . 31 2.12 Decomposition of BRL-Invoiced Exports to Argentina . 32 3.1 Rise and Fall of B&Ls . 54 3.2 California B&L’s in the Great Depression . 59 3.3 County Distribution of California Building and Loan Associations (1927) . 60 3.4 Balance Sheet: Dayton Plan . 63 3.5 Balance Sheet: Dayton Plan . 64 3.6 Balance Sheet: Raw Archives . 68 3.7 Age Distribution by Type . 75 3.8 Distribution of Fees by Type in 1930 . 81 3.9 Farmland Values and Dayton B&L Presence . 83 4.1 Cumulative Share of Population under Stay-at-Home Orders in the U.S. 101 4.2 Employment-Weighted State Exposure to Stay-at-Home Policies Through Week Ending April 4 . 102 4.3 Box Plots by Week of Initial UI Claims Relative to Employment for Early and Late Adopters of SAH orders . 109 4.4 Scatterplot of SAH Exposure to Cumulative Initial Weekly Claims for Weeks Ending March 21 thru April 4 . 110 v 4.5 On-Impact Response of Home Employment, Foreign Employment, and Union- Wide Employment to a Local SAH-induced: (i) Technology Shock with Flexible Prices, (ii) Technology Shock with Sticky Prices, (iii) Preference Shock with Flex- ible Prices, and (iv) Preference Shock with Sticky Prices . 111 A.1 Customs Form (Online) . 124 A.2 Number of Firms Over Time . 126 A.3 Number of Transaction Over Time . 126 A.4 Value Over Time . 127 A.5 BRL Value Shares (Greater than zero and less than one) . 128 A.6 Results with at least one pre-period observation . 129 A.7 Results at municipality level conditional on having all data . 130 A.8 Results assuming largest banks do not use the SML system . 131 A.9 Colombia ι Shares . 132 A.10 Argentina ι shares relative to other Latin America countries . 132 B.1 Coefficient Restricting Age . 144 A.1 County Retail Mobility Event Study . 151 A.2 County Workplace Mobility Event Study . 152 A.3 Benchmark Specification Estimated Dropping One State at a Time . 153 A.4 County Employment Event Study . 156 vi List of Tables 2.1 Currency Distribution Across Destinations . 16 2.2 Empirical Sample - Firm-Destination-HS6-Quarter . 16 2.3 Top Ten Banks by Assets (December 2005) and SML Authorization . 18 2.4 Placebo Tests . 25 2.5 Variance Decomposition . 33 2.6 Shipment-Level Effects of BRL Invoicing on Values . 36 2.7 Heterogeneity Analysis of the Effects of BRL Invoicing . 39 2.8 Effect of BRL Invoicing on Firm Export Behavior . 41 2.9 Implied Reduction in Frictions . 45 3.1 Distribution of Plans in the United States in 1923 . 56 3.2 California Building and Loan Associations by Type (1927) . 65 3.3 Balance Table (1927 Values) . 67 3.4 Balance Table for Existing Micro Data . 69 3.5 Failure Rates: Linear Probability Model . 71 3.6 Comparison of Dayton Measures . 73 3.7 Probability of Failure using Alternative Measure of Dayton Plan . 74 3.8 Probability of Failure including Age as a Predictor . 76 3.9 Percentage of Associations Penalizing Withdrawals . 77 3.10 The Costs of Membership by Type . 78 3.11 Rate Regressions . 80 3.12 Farmland Values and Dayton B&L Presence . 82 4.1 Effect of Stay-at-Home Orders on Cumulative Initial Weekly Claims Relative to State Employment for Weeks Ending March 21 thru April 4, 2020 . 97 4.2 On-Impact Response of Union-Wide Employment and Relative-Implied Aggre- gate Employment to a Local SAH-induced: (i) Preference Shock with Flexible Prices, (ii) Preference Shock with Sticky Prices, (iii) Technology Shock with Flex- ible Prices, and (iv) Technology Shock with Sticky Prices . 101 4.3 County-Level Specification: Effect of Stay-at-Home Orders on Local Employment Growth . 112 4.4 County-Level Specification: Effect of Stay-at-Home Orders on Local Unemploy- ment.
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