Working Paper: NBER ID: w26820
Authors: Peter Bednarek; Daniel Marcel Te Kaat; Chang Ma; Alessandro Rebucci
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.
Keywords: Capital Flows; Real Estate; Local Cycles; German Cities
JEL Codes: D22; D53; E22; E3; E44; F3; G01; G15; G21; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GIPS spread (D31) | GDP growth (O49) |
| local real estate market tightness (R31) | GDP growth (O49) |
| bank flow shocks (E50) | reallocation of credit (E51) |
| reallocation of credit (E51) | hiring and investment (G31) |
| hiring and investment (G31) | GDP growth (O49) |
| tighter local real estate market (R31) | impact of bank flow shocks on GDP growth (F65) |
| bank flow shocks (E50) | commercial property prices (R33) |
| commercial property prices (R33) | GDP growth (O49) |
| bank flow shocks (E50) | residential property prices (R31) |
| residential property prices (R31) | GDP growth (O49) |