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A comment on Xu (2022). Reshaping Global Trade: The Immediate and Long-Term Effects of Bank Failures

Author

Listed:
  • Bérard, Guillaume
  • Freitas, Dimitria
  • Verma, Priyam

Abstract

Xu (2022) estimates the causal impact of bank failures on the level of trades with a staggered difference-in-differences design and an IV strategy with Bartik instrument, using the 1866 banking crisis as a quasi-natural experiment. Findings, based on historical data on the trades and loans between London banks and banks around the world, show that countries exposed to bank failures in London immediately exported significantly less and did not recover their lost growth relative to unexposed places. Moreover, the effect lasted for decades. First, we reproduce the paper's main findings by running the original code and uncover three issues, one of which that slightly affects the main estimates reported in the study. Second, we test the robustness of the results to (1) removing weights from the regressions, (2) using a spatial HAC correction for the standard errors, and (3) implementing a method for possibly heterogeneous treatment effects with a staggered difference-indifferences design. Overall, we conclude that the main findings are valid and robust.

Suggested Citation

  • Bérard, Guillaume & Freitas, Dimitria & Verma, Priyam, 2023. "A comment on Xu (2022). Reshaping Global Trade: The Immediate and Long-Term Effects of Bank Failures," I4R Discussion Paper Series 85, The Institute for Replication (I4R).
    • Handle: RePEc:zbw:i4rdps:85
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    References listed on IDEAS

    as
    1. Chenzi Xu, 2022. "Reshaping Global Trade: The Immediate and Long-Run Effects of Bank Failures [“Shift-Share Designs: Theory and Inference,”]," The Quarterly Journal of Economics, Oxford University Press, vol. 137(4), pages 2107-2161.
    2. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
    3. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
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    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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