Capital Flows, Real Estate, and Local Cycles: Evidence from German Cities, Banks, and Firms

67 Pages Posted: 9 Mar 2020 Last revised: 14 Apr 2021

See all articles by Peter Bednarek

Peter Bednarek

Deutsche Bundesbank

Daniel te Kaat

University of Groningen

Chang Ma

Fudan University - Fanhai International School of Finance (FISF)

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: March 2020

Abstract

We study how an aggregate bank flow shock impacts German cities' GDP growth depending on the state of their local real estate markets. Identification exploits a policy framework assigning refugees to cities on a quasi-random basis and variation in non-developable area for the construction of a measure of exposure to local real estate market tightness. We estimate that the German cities most exposed to real estate market pressure grew 2.5-5.0 percentage points more than the least exposed ones, cumulatively, during the 2009-2014 period. Bank flow shocks shift credit to firms with more collateral. More collateral also leads firms to hire and invest more in response to these shocks.

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Suggested Citation

Bednarek, Peter and te Kaat, Daniel and Ma, Chang and Rebucci, Alessandro, Capital Flows, Real Estate, and Local Cycles: Evidence from German Cities, Banks, and Firms (March 2020). NBER Working Paper No. w26820, Available at SSRN: https://ssrn.com/abstract=3550968

Peter Bednarek (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
004969 9566-8972 (Phone)

HOME PAGE: http://www.bundesbank.de

Daniel Te Kaat

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen, Groningen 9700 AV
Netherlands

Chang Ma

Fudan University - Fanhai International School of Finance (FISF) ( email )

China

Alessandro Rebucci

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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