03 | June | 2025 | Mostly Economics

Archive for June 3rd, 2025

Electric telegraph, news coverage, and political participation: 1840-52

June 3, 2025

Tianyl Wang studies impact of electric telegraph on national elections in 1840-1952:

This paper uses newly digitized data on the growth of the telegraph network in America during 1840–1852 to study the impacts of the electric telegraph on national elections. Exploiting the expansion of the telegraph network in a difference-in-difference approach, I find that access to telegraphed news from Washington significantly increased voter turnout in national elections.

Newspapers facilitated the dissemination of national news to local areas. Text analysis on historical newspapers shows that the improved access to news from Washington led local newspapers to cover more national political news, including coverage of Congress, the presidency, and sectional divisions involving slavery.

Compare this to today where digital technology is making news available in no time and is feeding so much misinformation and propaganda.

Posted in Academic research & research papers, Economics - macro, micro etc | Leave a Comment »

The poor, the rich, and the credit channel of monetary policy

June 3, 2025

Annalisa Ferrando, Klaas Mulier, Steven Ongena and Manthos Delis in this ECB paper:

Monetary policy can have contrasting effects on economic inequality via distinct channels. We examine the effect working via the credit channel, whereby monetary policy induces heterogeneous access to credit for business owners based on their wealth. Using unique data on business loan applications from small firms, we find that monetary expansions increase the bank’s likelihood to approve loan applications, particularly so for low-wealth entrepreneurs, translating to higher future income and wealth. Survey data from 19 euro area countries on loan applications by SMEs confirms these findings, and shows that the effect transmits especially via weakly capitalized and less liquid banks.

Posted in Academic research & research papers, Central Banks / Monetary Policy, Economics - macro, micro etc, Financial Markets/ Finance | Leave a Comment »

Deposit franchise value of euro area banks

June 3, 2025

Cosimo Pancaro, Valerio Passantino and Allegra Pietsch in this ECB research note:

Banks’ deposit franchises can act as a stabilising force in the banking system by supporting profitability and containing interest rate risk. The value of a bank’s deposit franchise is defined as the long-term present value of its earnings from attracting and retaining low-cost and stable deposit funding, minus any operating expenses incurred (e.g. due to operating branches and marketing expenses).

In providing steady, low-cost funding, strong deposit franchises are a key source of bank profitability and, as such, have contributed to the recent surge in profitability. They also help banks to manage interest rate risk in a volatile interest rate environment, as changes in the economic value of a bank’s deposit franchise can offset valuation changes in long-term fixed-rate assets.

High deposit franchise values may also reduce banks’ risk-taking incentives and moral hazard by representing an economic asset that banks aim to protect, potentially resulting in higher market valuations.