Gustavo Cortes is an Assistant Professor of Finance at the University of Florida's Warrington College of Business. He holds a Ph.D. in Economics from the University of Illinois at Urbana-Champaign and a B.Sc. degree in Economics from the University of São Paulo.
O objetivo deste artigo e mostrar a relacao entre o mercado de credito hipotecario e as atividade... more O objetivo deste artigo e mostrar a relacao entre o mercado de credito hipotecario e as atividades industriais da Cidade de Sao Paulo, considerando as hipotecas uma forma nao-usual de nanciamento industrial. Hipotecas registram diferentes formas de nanciamento. Por meio delas, podemos descobrir se as industrias foram nanciadas por bancos nacionais ou estrangeiros, individuos privados ou emissao de debentures. O periodo analisado esta inserido em um contexto de intensa transformacao da economia brasileira, que inclui: expansao das exportacoes cafeeiras, urbanizacao e investimentos em infra-estrutura. Analisando os dados, armamos que o capital nativo e preponderante em hipotecas industriais e que os tamanhos das industrias importam para determinar as condicoes de nanciamento. Nao obstante, embora bancos e titulos sejam importantes para se explicar o nanciamento industrial, as hipotecas mostraram que a maior parte das operacoes de credito foram realizadas por agentes nao-bancarios.
This chapter analyzes the origins and development of the Brazilian banking system from colonial t... more This chapter analyzes the origins and development of the Brazilian banking system from colonial times to the present day. It begins with a description of the first credit relationships before the existence of banks in colonial Brazil, followed by a discussion of the difficulties faced by the first banks established in the imperial period. It then presents a detailed discussion of domestic and foreign banks during the First Republican, and the key institutional changes that occurred during the Great Depression of the 1930s and the military regime after 1964. Later, it covers banking activities in the hyperinflation period up to the country’s stabilization in 1994. The chapter concludes with an analysis of the recent period and how the banking system endured the Great Recession of 2008–2010 and the recent Brazilian fiscal crisis that began in 2014.
How could a primitive credit market finance the early industrialisation of an underdeveloped econ... more How could a primitive credit market finance the early industrialisation of an underdeveloped economy? To answer this question, we use a hand-collected data set of mortgage loans raised by industrial firms in the city of São Paulo during the period 1866-1914. These mortgages were debt obligations collateralised by land, improvements, machinery and equipment. We argue that the mortgage credit market was a key source of funding for early industrial investments in Brazil. We find that industries were mainly funded by non-banking and domestic agents. The empirical evidence suggests that mortgages were an important proxy for industrial investment.
ABSTRACT This article utilizes data from more than 100 countries over 30 years to identify the ke... more ABSTRACT This article utilizes data from more than 100 countries over 30 years to identify the key factors that make a country more attractive to foreign direct investment (FDI). We find evidence that a country's potential marginal returns to capital, available infrastructure, degree of trade openness, labor force qualification, and macroeconomic stability have a positive impact on FDI inflows. Our estimates capture a change in the role played by trade protection and an increase in the importance of human capital as globalization progressed. An application of our models illustrates why Mercosur countries have underperformed their peers in attracting FDI.
We study how bank credit shocks propagate through supplier-customer firm networks. We do so using... more We study how bank credit shocks propagate through supplier-customer firm networks. We do so using administrative data that covers firm-to-firm transactions in Brazil around the debacle of Lehman Brothers. Using the counter-cyclical reaction of government-owned banks in Brazil after Lehman's failure as a policy experiment, we show that credit shocks originated in bank-firm relationships are transmitted throughout the network of suppliers and customers, with measurable consequences for firms' real outcomes and survival probability. A firm with direct and indirect access to government credit (through its customers or suppliers) observed a 12.5% greater survival probability, vis-a-vis 4% when the firm has only direct access. Critically, we uncover drawbacks of these interventions, including a persistent increased concentration in the market share of firms that benefited from government liquidity.
No. We document two empirical facts for the U.S. life insurance sector during the 1918–19 Influen... more No. We document two empirical facts for the U.S. life insurance sector during the 1918–19 Influenza pandemic. First, we find no significant differences among U.S. insurers’ profitability after 1918. Second, there were fewer insurers in distress after the pandemic outbreak. Using synthetic control methods, we argue that the demand increase for new life insurance policies mitigated financial difficulties for insurers. While catastrophic from a public health perspective, the pandemic was a “blessing in disguise” for the insurance industry.
We uncover a tone transmission channel of monetary policy wherein the linguistic tone of press re... more We uncover a tone transmission channel of monetary policy wherein the linguistic tone of press releases by the Fed shapes the linguistic tone of macro-related dialogues in corporate conference calls occurring days after such releases. Applying machine-learning techniques to a granular dataset of dialogues between managers and equity analysts during conference calls, we find that the tone of macro-related dialogues is reflected in both contemporaneous stock market reactions as well as subsequent equity analysts' stock recommendations. Critically, the semantic content of monetary policy releases is consistently observed in macro dialogues between managers and analysts. A large sample analysis suggests that the effect of monetary policy tone on corporate conference calls is stronger in more recent years and for major unconventional monetary policy announcements. Taken together, our results shed light on how economic agents interpret "Fed Speak,'' underscoring non-trans...
We document two puzzling facts during the 1918–19 influenza outbreak. First, we find no significa... more We document two puzzling facts during the 1918–19 influenza outbreak. First, we find no significant differences among US life insurers’ profitability before or after 1918. Second, there are fewer insurers in distress after the outbreak. We argue that an increase in insurance demand offset higher death claim payouts. Moreover, we find that life insurers from heavily affected states were more likely to issue equity. The prudential control of state regulators also mitigated financial difficulties. The influenza pandemic, while severe from a public health perspective, was arguably a blessing in disguise for the sector.
Building on a real-options model of capital and labor responses to uncertainty, we show that the ... more Building on a real-options model of capital and labor responses to uncertainty, we show that the Brexit Referendum impacted American corporations, with measurable effects on decisions regarding investment, employment, R&D, and savings. The effects we identify are modulated by the degree of reversibility of production inputs like capital and labor. Among jobs lost in the US, most losses accrue to industries with less skilled workers. Our results describe how foreign-born uncertainty is transmitted across borders, shaping domestic capital formation and labor allocation. They warn against the consequences of rising uncertainty about the stability of political institutions in developed economies.
O objetivo deste artigo e mostrar a relacao entre o mercado de credito hipotecario e as atividade... more O objetivo deste artigo e mostrar a relacao entre o mercado de credito hipotecario e as atividades industriais da Cidade de Sao Paulo, considerando as hipotecas uma forma nao-usual de nanciamento industrial. Hipotecas registram diferentes formas de nanciamento. Por meio delas, podemos descobrir se as industrias foram nanciadas por bancos nacionais ou estrangeiros, individuos privados ou emissao de debentures. O periodo analisado esta inserido em um contexto de intensa transformacao da economia brasileira, que inclui: expansao das exportacoes cafeeiras, urbanizacao e investimentos em infra-estrutura. Analisando os dados, armamos que o capital nativo e preponderante em hipotecas industriais e que os tamanhos das industrias importam para determinar as condicoes de nanciamento. Nao obstante, embora bancos e titulos sejam importantes para se explicar o nanciamento industrial, as hipotecas mostraram que a maior parte das operacoes de credito foram realizadas por agentes nao-bancarios.
This chapter analyzes the origins and development of the Brazilian banking system from colonial t... more This chapter analyzes the origins and development of the Brazilian banking system from colonial times to the present day. It begins with a description of the first credit relationships before the existence of banks in colonial Brazil, followed by a discussion of the difficulties faced by the first banks established in the imperial period. It then presents a detailed discussion of domestic and foreign banks during the First Republican, and the key institutional changes that occurred during the Great Depression of the 1930s and the military regime after 1964. Later, it covers banking activities in the hyperinflation period up to the country’s stabilization in 1994. The chapter concludes with an analysis of the recent period and how the banking system endured the Great Recession of 2008–2010 and the recent Brazilian fiscal crisis that began in 2014.
How could a primitive credit market finance the early industrialisation of an underdeveloped econ... more How could a primitive credit market finance the early industrialisation of an underdeveloped economy? To answer this question, we use a hand-collected data set of mortgage loans raised by industrial firms in the city of São Paulo during the period 1866-1914. These mortgages were debt obligations collateralised by land, improvements, machinery and equipment. We argue that the mortgage credit market was a key source of funding for early industrial investments in Brazil. We find that industries were mainly funded by non-banking and domestic agents. The empirical evidence suggests that mortgages were an important proxy for industrial investment.
ABSTRACT This article utilizes data from more than 100 countries over 30 years to identify the ke... more ABSTRACT This article utilizes data from more than 100 countries over 30 years to identify the key factors that make a country more attractive to foreign direct investment (FDI). We find evidence that a country's potential marginal returns to capital, available infrastructure, degree of trade openness, labor force qualification, and macroeconomic stability have a positive impact on FDI inflows. Our estimates capture a change in the role played by trade protection and an increase in the importance of human capital as globalization progressed. An application of our models illustrates why Mercosur countries have underperformed their peers in attracting FDI.
We study how bank credit shocks propagate through supplier-customer firm networks. We do so using... more We study how bank credit shocks propagate through supplier-customer firm networks. We do so using administrative data that covers firm-to-firm transactions in Brazil around the debacle of Lehman Brothers. Using the counter-cyclical reaction of government-owned banks in Brazil after Lehman's failure as a policy experiment, we show that credit shocks originated in bank-firm relationships are transmitted throughout the network of suppliers and customers, with measurable consequences for firms' real outcomes and survival probability. A firm with direct and indirect access to government credit (through its customers or suppliers) observed a 12.5% greater survival probability, vis-a-vis 4% when the firm has only direct access. Critically, we uncover drawbacks of these interventions, including a persistent increased concentration in the market share of firms that benefited from government liquidity.
No. We document two empirical facts for the U.S. life insurance sector during the 1918–19 Influen... more No. We document two empirical facts for the U.S. life insurance sector during the 1918–19 Influenza pandemic. First, we find no significant differences among U.S. insurers’ profitability after 1918. Second, there were fewer insurers in distress after the pandemic outbreak. Using synthetic control methods, we argue that the demand increase for new life insurance policies mitigated financial difficulties for insurers. While catastrophic from a public health perspective, the pandemic was a “blessing in disguise” for the insurance industry.
We uncover a tone transmission channel of monetary policy wherein the linguistic tone of press re... more We uncover a tone transmission channel of monetary policy wherein the linguistic tone of press releases by the Fed shapes the linguistic tone of macro-related dialogues in corporate conference calls occurring days after such releases. Applying machine-learning techniques to a granular dataset of dialogues between managers and equity analysts during conference calls, we find that the tone of macro-related dialogues is reflected in both contemporaneous stock market reactions as well as subsequent equity analysts' stock recommendations. Critically, the semantic content of monetary policy releases is consistently observed in macro dialogues between managers and analysts. A large sample analysis suggests that the effect of monetary policy tone on corporate conference calls is stronger in more recent years and for major unconventional monetary policy announcements. Taken together, our results shed light on how economic agents interpret "Fed Speak,'' underscoring non-trans...
We document two puzzling facts during the 1918–19 influenza outbreak. First, we find no significa... more We document two puzzling facts during the 1918–19 influenza outbreak. First, we find no significant differences among US life insurers’ profitability before or after 1918. Second, there are fewer insurers in distress after the outbreak. We argue that an increase in insurance demand offset higher death claim payouts. Moreover, we find that life insurers from heavily affected states were more likely to issue equity. The prudential control of state regulators also mitigated financial difficulties. The influenza pandemic, while severe from a public health perspective, was arguably a blessing in disguise for the sector.
Building on a real-options model of capital and labor responses to uncertainty, we show that the ... more Building on a real-options model of capital and labor responses to uncertainty, we show that the Brexit Referendum impacted American corporations, with measurable effects on decisions regarding investment, employment, R&D, and savings. The effects we identify are modulated by the degree of reversibility of production inputs like capital and labor. Among jobs lost in the US, most losses accrue to industries with less skilled workers. Our results describe how foreign-born uncertainty is transmitted across borders, shaping domestic capital formation and labor allocation. They warn against the consequences of rising uncertainty about the stability of political institutions in developed economies.
Housing is a crucial channel through which migration affects the local economy and wealth distrib... more Housing is a crucial channel through which migration affects the local economy and wealth distribution. However, most of what we know about the effects of migration on housing is from studies focused on the inflows of immigrants. This paper quantifies the impact of out-migration on local housing empirically. We study one of the largest ethnically motivated migration shocks in US history, the United States' Mexican repatriation of the 1930s. Using a novel automated matching technique to link houses across the 1930 and 1940 Censuses, we show that repatriating Mexicans during the Great Depression significantly affected housing in various dimensions. Employing an instrumental variable approach, we show that Mexican-occupied houses experienced a disproportionately large devaluation of their house values and rents in cities more exposed to the repatriation. Critically, the repatriation mattered for aggregate outcomes in US cities: it decreased building permit growth rates, the median house value growth, and the median rent growth at the city level. Our results suggest that repatriations have a long-lasting impact, leaving a footprint on the local economy.
Uploads