Handling Spillover Effects in Empirical Research: An Application using Credit Supply Shocks

46 Pages Posted: 23 May 2019

See all articles by Tobias Berg

Tobias Berg

Frankfurt School of Finance & Management

Daniel Streitz

Copenhagen Business School

Date Written: April 24, 2019

Abstract

Despite their importance, the discussion of spillover effects in empirical research misses the rigor dedicated to endogeneity concerns. We show that i) even with random treatment, spillovers lead to an intricate bias in estimating treatment effects, ii) there is a trade-off between endogeneity and spillover concerns, iii) the current practice of using individual level regressions to identify direct effects and aggregate level regressions to learn about spillover effects can lead to misleading conclusions. We develop a simple guidance for empirical researchers, apply it to a credit supply shock, and highlight differences in the results compared to current empirical practice.

Suggested Citation

Berg, Tobias and Streitz, Daniel, Handling Spillover Effects in Empirical Research: An Application using Credit Supply Shocks (April 24, 2019). Available at SSRN: https://ssrn.com/abstract=3377457 or http://dx.doi.org/10.2139/ssrn.3377457

Tobias Berg (Contact Author)

Frankfurt School of Finance & Management ( email )

Sonnemannstra├če 9-11
Frankfurt am Main, 60314
Germany

Daniel Streitz

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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