Effects of Monetary Policy on Firm Outcome

Background

Mississippi is divided into two federal reserve system district, the northern half controlled by the St. Louis Fed and the southern half by the Atlanta Fed. During the Great Depression, the Atlanta Fed extended credit to ailing firms, while the St. Louis Fed did not. I would like to get some preliminary results to see the impact of these two different monetary policies on entry/exit of firms.

Dataset

The dataset contains credit rating, size, and sector variables for two similar counties in Mississippi (Neshoba and Winston), one in the northern (St. Louis controlled) district and the other in the southern (Atlanta controlled district).

Tasks

1. Simple logit/probit/tobit model to determine probability of firm exit based on monetary policy pursued in their district controlling for size and credit worthiness.

Pr(Exit) = fed_policy + industry +  credit_rating + size_of_firm + epsilon

2. Vertically merge year to year data (DONE)	

3. Collect summary statistics
- number of firms in each time period (DONE)
- number of firms by pecuniary strength and size

4. Identify number of firms who exit/enter from year to year
- break down by federal reserve district
- break down by pecuniary strength
- break down by credit rating

5. Data cleaning
- Change empty values to some missing data value (DONE)
- Correct typos in naming programmatically (DONE)
- Create dummy variables for each industry and assign appropriate values
- create additional column for fed district border (DONE)

6. Visualization