@article{xu2022reshaping,
title={Reshaping global trade: the immediate and long-run effects of bank failures},
author={Xu, Chenzi},
journal={Quarterly Journal of Economics},
volume={137},
number={4},
pages={},
year={2022},
publisher={Oxford University Press}
}

I show that a disruption to the financial sector can reshape the patterns of global trade for decades. I study the first modern global banking crisis originating in London in 1866 and collect archival loan records that link multinational banks headquartered there to their financing abroad. Countries exposed to bank failures in London immediately exported significantly less and did not recover their lost growth relative to unexposed countries. Their market shares within each destination remained significantly lower for four decades. Decomposing the persistent market-share losses shows that they primarily stem from lack of extensive margin growth, as the financing shock caused importers to source more from new trade partners. Exporters producing more substitutable goods, those with little access to alternative forms of credit, and those trading with more distant partners experienced more persistent losses, consistent with the existence of sunk costs and the importance of finance for intermediating trade.

@techreport{xu2022real,
title={Real effects of stabilizing private money creation},
author={Xu, Chenzi and Yang, He},
institution={National Bureau of Economics Research}
}

We show that decentralized privately created money with unstable values can hinder the traded, more transaction-friction sensitive, sector of the economy. We do so in the context of the National Banking Act of 1864 in the United States that created a new federally-regulated, fully-backed currency as an alternative to the pre-existing money supply, which consisted of unsecured notes printed by thousands of local private banks. Using a discontinuous change across towns in the costs of accessing this new type of stable, federally-backed money as a natural experiment, we show that places gaining access to the new currency experienced a shift in the composition of agricultural production from non-traded to traded goods and increased employment in trade-related professions. In addition, counties gaining access to the new stable money increased their manufacturing output by sourcing more inputs, and they innovated more, all consistent with the stable currency improving their market access and allowing them to expand through trade.

What explains the differences in how often countries default on their external debt and how quickly they re-access external credit markets afterwards? While some countries borrow again within a few years, often only to default again, others remain excluded for decades. In this paper we first document this pattern of "serial" default in the London market during the period from 1820 to 1939 using the frequency, duration, and scale of default. We provide a model of investor learning about sovereigns' likelihood of default based on the publicly observed circumstances of default, which generates predictions for their bond prices and terms of future issuance. Second, we test these hypotheses using a newly created dataset of text-based measures of the circumstances of borrowing and default. These qualitative measures come from the universe of historical financial newspapers published in Britain, and they allow us to more fully capture the information set that was available to investors.

We introduce novel data on the universe of multinational banking activity during the first age of globalization from 1870 1914 and show that these financial connections significantly increased trade volumes. First, we describe the data and show that the distribution of countries `exporting' banks is very skewed: the top four exporters are responsible for almost 80% of all multinational banks. Second, we show that there is a significant positive relationship between a multinational banking connection and exports using a standard gravity framework. We also employ a near-neighbors approach to disentangle the causal effect of bank entry from the possibility that banks simply anticipated exports growth.