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| Working Papers – 2019 |
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What Happens in Vegas Doesn’t Always Stay in Vegas: The Dynamics of House Prices and Foreclosure Rates Across Space and Time FDIC Center for Financial Research Working Paper No. 2019-02 This Version: November 2019 Abstract This paper identifies instruments for house prices and foreclosure rates and estimates a Dynamic Spatial Simultaneous Equation System (DSSES) to investigate the dynamics of them across space and time. Shocks to the foreclosure rate in one state not only affect house prices in that state but also the foreclosure rates and house prices in nearby states. When it comes to the housing market, what happens in Vegas doesn’t always stay in Vegas. A one standard deviation foreclosure shock leads to a 2 percent decline in real house prices over the long run. JEL Codes: C33, C36, R31 |
Breaking the Word Bank: Effects of Verbal Uncertainty on Bank Behavior FDIC Center for Financial Research Working Paper No. 2019-01 This Version: February 2019 Abstract Banks differ from non-financial firms as banks must communicate to both regulators and shareholders. Also, unlike non-financial firms, banks possess opaque and complex balance sheets and are the main providers of credit to the real economy. In this paper, I propose a new index to detect the idiosyncratic uncertainty banks face at the bank-quarter level by applying natural language processing techniques to earnings conference call transcripts. The index reveals which banks at a given quarter signal more uncertainty about their balance sheets. Higher uncertainty is associated with lower lending and higher trading the next quarter, suggesting active management of uncertainty. The active management of uncertainty is more pronounced during periods of high aggregate volatility and for banks with more skin in the game. Using loan level data and firm fixed effects, I control for demand-side factors and find that higher bank level uncertainty is associated with lower loan issuances the following quarter. JEL Codes: G21, G3, E5, D8 |
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