Department of Economics, UCSC

In the past two decades, a number of banks joined global initiatives aimed to mitigate climate change by “greening” their asset portfolios. We study whether banks that made such commitments have a different emission exposure of their portfolios of syndicated loans than banks that did not. We rely on loan-level information with global coverage combined with country-industry information on emissions. We find that all banks have reduced their loan-emission exposures over the last 8 years. However, we do not find differences between banks that did and those that did not signal their sustainability goals, with the exception of early signers of Principles of Responsible Investments (PRI), who already had lower exposure to emissions through their syndicated lending. In addition, banks that signed PRI shortened the maturity of the loans extended to highly-emitting industries but only temporarily. Thus, we conclude that banks reduced their exposure to climate transition risks on average, but voluntary climate commitments did not contribute to syndicated loan reallocation away from highly-emitting sectors.

Governments often privatize the administration of regulations to third-party specialists paid for by the regulated parties. We study how the resulting conflict of interest can have unintended consequences for the distributional impacts of regulation. In Massachusetts, the party responsible for hazardous waste contamination must hire a licensed contractor to quantify the environmental severity. We find that contractors’ evaluations favor their clients, exhibiting substantial score bunching just below thresholds that determine government oversight of the remediation. Client favoritism is more pronounced in socioeconomically disadvantaged neighborhoods and is associated with inferior remediation quality, highlighting a novel channel for inequities in pollution exposure. (JEL D63, J15, K32, L51, Q53, R23)

These essays were written as columns for the Financial Express daily newspaper in India. This collection begins in December 2019, so technically the first two pieces were not written in the “Year of Coronavirus.” But they provide a good starting point. The collection ends in December 2020: there are 26 essays in all. All of these pieces appeared in the Financial Express, in print and online, with varying lags from the dates of writing, which are noted after each essay. The newspaper versions invariably had different, more elaborate titles, but the ones below are my original, somewhat spare, title choices. I hope that reading these pieces in sequence and together will provide a consistent and useful perspective on Indian economic policy in a year that has been truly extraordinary. I have not changed any of the text, so these represent my real-time and evolving understandings of India’s situation over this period. Many of the essays are about the response to the pandemic, so they focus on non-economic aspects of policy but the economic implications are, I would like to think, always in the analysis. Two of the essays focus on the US – its pandemic response and its presidential election – neither is about India’s policies at all, but each has, I hope, some lessons for India.

The need to monitor aggregate financial stability was made clear during the global financial crisis of 2008-2009, and, of course, the need to monitor individual financial firms from a microprudential standpoint remains. However, linkages between financial firms cannot be observed or measured easily. In this paper, we propose a procedure that generates measures of connectedness between individual firms and for the system as a whole based on information observed only at the firm level; i.e., no explicit linkages are observed. We show how bank outcome variables of interest can be decomposed, including with mixed-frequency models, for how network analysis to measure connectedness across firms. We construct two such measures: one based on a decomposition of bank stock returns, the other based on a decomposition of their quarterly return on assets. Network analysis of these decompositions produces measures that could be of use in financial stability monitoring as well as the analysis of individual firms' linkages.