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NATIONAL BUREAU OF ECONOMIC RESEARCH
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30 October 2014

Housing Collateral, Credit Constraints, and Entrepreneurship

Thais Lærkholm Jensen, Søren Leth-Petersen, and Ramana Nanda find that a mortgage reform in Denmark that exogenously increased access to credit had a positive impact on entrepreneurship. Their results provide evidence that credit constraints affect entrepreneurship, but that the overall magnitude is small and that individuals selecting into entrepreneurship when constraints are relaxed may be more likely to fail.

29 October 2014

How Does Government Borrowing Affect Corporate Financing and Investment?

U.S. federal debt issuance significantly affects corporate financial policies and balance sheets through its impact on investors’ portfolio allocations and the relative pricing of different assets, John Graham, Mark T. Leary, and Michael R. Roberts report. Government debt is strongly negatively correlated with corporate debt and investment, and strongly positively correlated with corporate liquidity.

28 October 2014

A Distant Mirror of Debt, Default, and Relief

Carmen M. Reinhart and Christoph Trebesch find that debt relief achieved through default and restructuring averaged 21 percent of GDP for advanced economies in 1932-1939 and 16 percent for emerging markets in 1979-2010. They also find that once debt relief has been completed, countries experience higher income levels and growth rates, as well as lower debt-servicing burdens and government debt.

27 October 2014

Asiaphoria Meets Regression to the Mean

China and India may grow much less rapidly than is currently anticipated, Lant Pritchett and Lawrence H. Summers write, for history teaches that abnormally rapid growth is rarely persistent. The authors suggest that high levels of state control and corruption along with high measures of authoritarian rule make a decline in growth in China more likely.
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