NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Daniel M. te Kaat

University of Groningen
Nettelbosje 2
Groningen 9747 AE
Netherlands

E-Mail: d.m.te.kaat@rug.nl
Institutional Affiliation: University of Groningen

NBER Working Papers and Publications

March 2020Capital Flows, Real Estate, and Local Cycles: Evidence from German Cities, Banks, and Firms
with Peter Bednarek, Chang Ma, Alessandro Rebucci: w26820
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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