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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2023 Grand Challenge: Workforce Disrupted
Market-Based Solutions to Vital Economic Issues



Global risk and risk aversion shocks have distinct distributional impacts on emerging market capital flows and returns. In particular, we find salient consequences of these different global shocks for tail risk in emerging markets. Open-end mutual fund trading provides a key mechanism linking shocks facing global investors to extreme capital flow and return realizations.

Reliably detecting insider trading is a major impediment to both research and regulatory practice. Using account-level transaction data, we propose a novel approach. Specifically, after extracting several key empirical features of typical insider trading cases from existing regulatory actions, we then employ a machine learning methodology to identify suspicious insiders across our full sample.

The unprecedented increase in non-bank financial intermediation, particularly open-end mutual funds and ETFs, over the last two decades, accounts for nearly half of external financing flows to emerging markets exceeding cross-border lending by global banks.

First, we address the relationship between ownership and employees’ labor outcomes. Second, we present an overview of the literature studying the relationship between capital structure and labor markets, including the implications of financial distress. Third, we connect labor with the fast-growing literature on inequality within firms and investments in technology adoption.

The data-generating process of productivity growth includes both trend and business-cycle shocks, generating many counterfactuals for prices under full-information. In practice, agents cannot immediately distinguish between the two shocks, leading to "rational confusion": each shock inherits properties of its counterpart.

This paper examines how US immigration-induced labor mobility frictions affect entrepreneurship and firm monopsony. I exploit a natural experiment in the US immigration system that unexpectedly increased Green Card (GC) related job-switching frictions for Indian and Chinese immigrants in October 2005. Using matched employee-employer data from LinkedIn, I confirm that this shock reduced inter-firm employee mobility for Indian and Chinese employees.

We study the relation between trade credit, asset prices, and production-network linkages. Empirically, firms extending more trade credit earn 7.6% p.a. lower risk premiums and maintain longer relationships with customers.

Kenan Institute Research Director Christian Lundblad navigated the cognitive dissonance provided by another strong jobs report when considered alongside more negative indicators during the institute’s latest economic briefing July 8. The virtual event took place at 9 a.m. after the release of the latest monthly employment numbers. Lundblad also answered questions from the audience, including limitations on the Federal Reserve in addressing core consumer price issues, the differences among regional labor markets, and the probability of an actual recession vs. a technical recession occurring this year.

We coin the term credit market fluidity to describe the intensity of credit reallocation, whose properties and implications we study within the commercial loan market in France over the period 1998 through 2018. We base our analysis on credit register data and thus provide a more complete account of gross credit flows across and within bank loan portfolios.

This study uses passage of the Dodd-Frank Act as a setting to examine whether changes in legal liability exposure faced by credit rating agencies affect the number of financial statement information signals required before rating changes. For upgrades, we predict and find that the greater legal exposure after the Act incentivized rating agencies to require more information signals, i.e., a greater number of prior quarters in which upgrades were implied by financial statement information.

Using a proprietary dataset from 2016 to 2019, we find that order flows from foreign investors, facilitated by regulatory liberalization through several channels, present strong predictive power for future stock returns in the Chinese market.

We analyze the impact of the introduction of credit default swaps (CDSs) on real decision-making within the firm. Our structural model predicts that CDS introduction increases debt capacity more when uncertainty about the credit events that trigger CDS payment is lower.