Essays on political distortions in banking and the real economy

0584714 - NHÚ 2024 RIV CZ eng D - Dizertace
Mamonov, Mikhail
Essays on political distortions in banking and the real economy.
Prague: Charles University, CERGE, 2023. 308 s.
Grant CEP: GA MŠMT(CZ) LX22NPO5101
Institucionální podpora: RVO:67985998
Klíčová slova: financial sanctions * Russia * bank closures
Obor OECD: Applied Economics, Econometrics
https://www.cerge-ei.cz/pdf/dissertations/Dissertation_Final_Mamonov.pdf

Politics brings numerous distortions into the work of the banking system and the real economy. This Thesis explores how political distortions affect bank lending decisions, impact the real decisions made by firms borrowing from “politically distorted” banks, and change the overall shape of the macroeconomy. The first chapter studies the impacts of global financial sanctions on banks and their corporate borrowers in Russia at the micro level. Following Crimea’s annexation by the Kremlin, the West consecutively imposed financial sanctions between 2014 and 2019, which allowed targeted (but not yet sanctioned) banks to adapt their international and domestic exposure in advance. We suggest a modification of a staggered difference-indifferences approach in which we explicitly estimate bank’s in-advance adaptation to anticipated treatment and the value added of the realized treatment. We establish that the overall effect of sanctions consists of a combination of large negative anticipation effects (intended) and large positive added-value effects (unintended), which completely offset each other in our setting. Using the syndicated loan data, we find that the negative real effects of sanctions materialized only when sanctioned firms borrowed from sanctioned banks. When borrowing from unsanctioned banks, sanctioned firms actually increased employment and investment, though they still lost in terms of market sales. The second chapter takes a macroeconomic perspective to examine the effects of sanctions on key aggregated indicators including GDP, consumption, and investment, and then explores cross-sectional variations of those effects in samples of firms and households. We introduce a novel approach to measuring sanctions shock—a high-frequency identification (HFI) based on US sanction announcements and daily data on Russia’s US Dollar-denominated sovereign bonds. We then exploit my HFI-based sanctions news shock as an instrument in a VAR model of the Russian economy. We show that the sanction announcements in 2014–2015 were actually very potent: the underlying sanctions may have led to a GDP decline of 3.2%, not 0 to 1.5% as found in previous literature. The third and fourth chapters analyze a “parallel” political distortion in Russia in the 2010s—a large-scale bank closure policy initiated by the Central Bank of Russia six months before the sanctions began, which resulted in the detection and closure of roughly 700 private banks by 2022. Using unique credit register data on the universe of loans in Russia, we investigate how firms were sorting between “good” and (not-yet-detected) “bad” banks following the closure of their prior banks, and how this sorting affected these firms’ performance in terms of employment, investment, and market sales.
Trvalý link: https://hdl.handle.net/11104/0352565