Institutional Affiliation: University of Florida
|Global Effects of the Brexit Referendum: Evidence from US Corporations|
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We show that the 2016 Brexit Referendum led American corporations to cut jobs and investment within US borders. Using establishment-level data, we document that these effects were modulated by the degree of reversibility of capital and labor. American job losses were particularly pronounced in industries with less skilled and more unionized workers. UK-exposed firms with less redeployable capital and high input-offshoring dependence cut investment the most. Data on the near-universe of US establishments also point to measurable, negative effects on establishment turnover (openings and closings). Our results demonstrate how foreign-born political uncertainty is transmitted across international borders, shaping domestic capital formation and labor allocation.
|Regional Monetary Policies and the Great Depression|
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The Great Depression provides a unique setting to test the impact of monetary policies on economic activity in a monetary union within the same country during a severe crisis. Until the mid-1930s, the 12 Federal Reserve banks had the ability to set their own discount rates and conduct independent monetary policy. Using a structural VAR with sign restrictions and new monthly data for each Federal Reserve district between 1923-33, we extract a national monetary policy factor from the 12 discount rates of the Federal Reserve banks. We then identify the region-specific component for each Fed district by subtracting the common factor component of monetary policy from the discount rate of each Federal Reserve bank. Our findings suggest that there was significant variation in regional monetary po...
|Stock Volatility and the Great Depression|
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Stock return volatility during the Great Depression has been labeled a “volatility puzzle” because the standard deviation of stock returns was two to three times higher than any other period in American history (Officer, 1973; Wilson, Sylla, and Jones; 1990). We investigate the “volatility puzzle” using a new series of building permits, a forward-looking measure of economic activity. Our results suggest that the volatility of building permit growth largely explains the high level of stock volatility during the Great Depression. Markets factored in the possibility of a forthcoming economic disaster.
Published: Gustavo S Cortes & Marc D Weidenmier, 2019. "Stock Volatility and the Great Depression," The Review of Financial Studies, vol 32(9), pages 3544-3570. citation courtesy of