Research Papers:
Cotter, Christopher. 2021. "Off the Rails: The Real Effects of Railroad Bond Defaults following the Panic of 1873." AEA Papers and Proceedings, 111: 508-13.
Abstract: Although corporate default crises are often quite severe, previous work has found little impact on real macroeconomic variables. This article investigates the relationship between railroad defaults and the balance sheets of local banks following the Panic of 1873. Receivers appointed to run railroads in default lacked the legal tools necessary to fully maintain railroad operations. The results indicate that railroad bond defaults negatively impacted the lending activity of local banks. Affected banks experienced declines in loans and deposits along with increases in excess reserves. These findings point to a disruption of the transportation network attributable to the railroad bond default crisis.
Extended working paper version here.
Cotter, C., Rousseau, P.L. and Vu, N.T., 2021. Electrification, telecommunications, and the finance-growth nexus: Evidence from firm-level data. Energy Economics, 94, p.105073.
Abstract: We explore variations in access to energy and telecommunications improvements across firms in 57 and 112 developing countries, respectively, between 2002 and 2014, and find that national investments in technological infrastructures provide a channel through which financial development promotes firm-level adoption of tangible innovations. In particular, when countries make large investments in their energy (electricity and natural gas) and telecommunications infrastructures, firms with greater access to financial resources are better positioned to benefit from these investments, experiencing significantly fewer power interruptions, more adoptions of power generators, and greater website use, all of which are related to higher firm-level growth in sales and employment.
“Regulatory Competition, State Banking, and Economic Growth in the National Banking Period” [under review]
Abstract: The dual banking system created an environment of regulatory competition between state and federal bank regulators that led to the passage of free banking laws in a number of states prior to 1900, allowing state-chartered banks to open in areas underserved by federally-chartered banks. This paper demonstrates the role that this expansion of state-chartered banking played in promoting economic growth. I use both an initial banking variables approach and an instrumental variables approach to identify the impact of state banking growth on county-level output and capital. The results indicate that state banks significantly contributed to output and capital growth in the agricultural sector, while the impact of national banks is concentrated primarily in the manufacturing sector. These findings suggest that state free banking laws, encouraged by regulatory competition, significantly increased the growth of agricultural output and capital during this period.
"Correspondent Banking, Systematic Risk, and the Panic of 1893," with Peter L. Rousseau [draft available upon request]
Abstract: The network of correspondent banking relationships was a primary transmission channel for systemic risk, bank failures, and financial panics during the U.S. National Banking period. Using comprehensive data on primary correspondent relationships for all national, state, savings, and private banks in the lead up to the Panic of 1893, we demonstrate that the failure of both upstream correspondents and downstream respondents increased the likelihood that a given bank would itself fail. Members of the New York Clearinghouse also saw significant declines in both deposits and loans early in the panic when their respondents failed and declines in their stock prices throughout the panic, illustrating another channel through which respondent failures affected real economic activity.
Works in Progress:
“Silver Coinage and Banking Expansion in the Late 1800s,” with Peter L. Rousseau and Matthew Jaremski
Economic historians generally view the silver coinage of the 1880s and 1890s as an ill-conceived and detrimental economic policy that jeopardized the gold standard and led to the Panic of 1893. However, silver coinage also played an important role in the expansion of the banking system that began after the Civil War and continued through this period, laying the groundwork for the later Federal Reserve system. We use a county-level analysis of bank formation to show that growth in banking in the midwest and south was bolstered by access to silver coinage at the New Orleans mint, via the Mississippi River system. We also find that silver coinage had an impact on banking in the west, via the silver coined at the San Francisco mint.
Cotter, Christopher. 2021. "Off the Rails: The Real Effects of Railroad Bond Defaults following the Panic of 1873." AEA Papers and Proceedings, 111: 508-13.
Abstract: Although corporate default crises are often quite severe, previous work has found little impact on real macroeconomic variables. This article investigates the relationship between railroad defaults and the balance sheets of local banks following the Panic of 1873. Receivers appointed to run railroads in default lacked the legal tools necessary to fully maintain railroad operations. The results indicate that railroad bond defaults negatively impacted the lending activity of local banks. Affected banks experienced declines in loans and deposits along with increases in excess reserves. These findings point to a disruption of the transportation network attributable to the railroad bond default crisis.
Extended working paper version here.
Cotter, C., Rousseau, P.L. and Vu, N.T., 2021. Electrification, telecommunications, and the finance-growth nexus: Evidence from firm-level data. Energy Economics, 94, p.105073.
Abstract: We explore variations in access to energy and telecommunications improvements across firms in 57 and 112 developing countries, respectively, between 2002 and 2014, and find that national investments in technological infrastructures provide a channel through which financial development promotes firm-level adoption of tangible innovations. In particular, when countries make large investments in their energy (electricity and natural gas) and telecommunications infrastructures, firms with greater access to financial resources are better positioned to benefit from these investments, experiencing significantly fewer power interruptions, more adoptions of power generators, and greater website use, all of which are related to higher firm-level growth in sales and employment.
“Regulatory Competition, State Banking, and Economic Growth in the National Banking Period” [under review]
Abstract: The dual banking system created an environment of regulatory competition between state and federal bank regulators that led to the passage of free banking laws in a number of states prior to 1900, allowing state-chartered banks to open in areas underserved by federally-chartered banks. This paper demonstrates the role that this expansion of state-chartered banking played in promoting economic growth. I use both an initial banking variables approach and an instrumental variables approach to identify the impact of state banking growth on county-level output and capital. The results indicate that state banks significantly contributed to output and capital growth in the agricultural sector, while the impact of national banks is concentrated primarily in the manufacturing sector. These findings suggest that state free banking laws, encouraged by regulatory competition, significantly increased the growth of agricultural output and capital during this period.
"Correspondent Banking, Systematic Risk, and the Panic of 1893," with Peter L. Rousseau [draft available upon request]
Abstract: The network of correspondent banking relationships was a primary transmission channel for systemic risk, bank failures, and financial panics during the U.S. National Banking period. Using comprehensive data on primary correspondent relationships for all national, state, savings, and private banks in the lead up to the Panic of 1893, we demonstrate that the failure of both upstream correspondents and downstream respondents increased the likelihood that a given bank would itself fail. Members of the New York Clearinghouse also saw significant declines in both deposits and loans early in the panic when their respondents failed and declines in their stock prices throughout the panic, illustrating another channel through which respondent failures affected real economic activity.
Works in Progress:
“Silver Coinage and Banking Expansion in the Late 1800s,” with Peter L. Rousseau and Matthew Jaremski
Economic historians generally view the silver coinage of the 1880s and 1890s as an ill-conceived and detrimental economic policy that jeopardized the gold standard and led to the Panic of 1893. However, silver coinage also played an important role in the expansion of the banking system that began after the Civil War and continued through this period, laying the groundwork for the later Federal Reserve system. We use a county-level analysis of bank formation to show that growth in banking in the midwest and south was bolstered by access to silver coinage at the New Orleans mint, via the Mississippi River system. We also find that silver coinage had an impact on banking in the west, via the silver coined at the San Francisco mint.