Seminar Topic:

The speaker will present a paper which proposes a new channel to explain the medium- to long-term effects of banking crises on the real economy. It embeds a banking sector prone to runs in a stylized growth model to show that episodes of bank distress affect not only the volume, but also the composition of firm investment, by disproportionally decreasing investments in innovation. This hypothesis is confirmed empirically employing industry-level data on R&D spending around 13 recent banking crises episodes.

Using difference-in-difference identification strategies, the author shows that industries that depend more on external finance, in more bank-based economies, invest disproportionally less in R&D following systemic banking crises. These industries also have a lower share of R&D spending in total investment, suggesting a shift in the composition of investment that is specific to recessions following banking crises and not other business cycle recessions.

Speaker Bio:

Oana Peia is an assistant professor in the School of Economics at University College Dublin.  She has a PhD in Economics from ESSEC Business School and THEMA University of Cergy-Pontoise. Her research is at the intersection of finance and macroeconomics with an emphasis on the role that financial intermediaries play in the real economy with research interests that include financial crises, economic growth, global games and time series econometrics. Her work has won the 2016 Olga Radzyner Award from the National Bank of Austria and her PhD won the best thesis prize from the Banque de France Foundation for Monetary, Financial and Banking Economic Research.

See publication