Using granular data on global investment funds in difference-in-differences regressions around the announcement of the U.S. Inflation Reduction Act (IRA), we identify a novel international spillover channel of green industrial policies. Sustainable global investment funds received more inflows with the act announcement, in turn increasing their cross-border portfolio investments worldwide. Recipient economies better prepared to address climate change benefited most from sustainable global funds’ additional investments. Our results are stronger for funds with a larger portfolio share invested in the United States and in IRA-targeted industries. Yet, we see strong international spillovers even for non-U.S.-domiciled sustainable funds investing entirely outside the United States. Thus, global investment funds have become an important conduit for the international spillover of climate policies.

This paper explores the impact of cross-border capital flows on bank lending volumes and risk. Employing bank-level data from the euro area, we show that capital inflows are associated with higher bank credit supply and lower average loan quality. By showing that the lending patterns of smaller domestic banks are also affected, we present evidence that the impact of international capital flows is not limited to large banks with international exposure. Nevertheless, the observed effects are stronger for large banks as well as for banks with low levels of capitalisation, suggesting that agency issues reinforce the link between capital flows and bank lending.

In this paper, we revisit the question of how bank bailouts affect economic growth. We adopt a broad concept of bailouts, which includes both capital injections and liquidity support to the banking system. We employ an identification strategy that controls for the various dimensions of bailout endogeneity and find that liquidity support has a significant positive real economic effect. The effect of recapitalizations per se is not statistically significant, but they reinforce the positive impact of liquidity interventions. Utilizing bank-level data, we provide evidence that this is the case because better-capitalized banks and banks in significantly recapitalized systems have a higher propensity to lend, thus raising aggregate-level real economic growth.

We study how capital flows affects German cities’ GDP growth depending on the state of their real estate markets. Identification exploits a policy framework assigning refugees to cities on a quasi-random basis and variation in nondevelopable area for the construction of an exposure measure to real estate market tightness. We estimate that the most exposed cities to real estate market tightness grew at least 1.9 percentage points more than the least exposed ones, cumulatively, from 2009 to 2014. Capital inflows shift credit to firms with more collateral, which leads firms to hire and invest more in response to these shocks.

This paper examines the relationship between central bank funding and credit risk-taking. Employing bank-firm-level data from the German credit registry during 2009:Q1-2014:Q4, we find that banks borrowing from the central bank rebalance their portfolios towards ex-ante riskier firms. We further establish that this effect is driven by the ECB’s maturity extensions and that the risk-taking sensitivity of banks borrowing from the ECB is independent of idiosyncratic bank characteristics. Finally, we show that these shifts in bank lending are associated with an increase in firm-level investment and employment, but also with a deterioration of bank balance sheet quality in the following year.