This website features a collection of links to outside resources, many of which were cited in The Captured Economy, for readers interested in learning more about regressive regulation.
To filter the reference library by topic, please use the links on a topic page or open this page on a full-size screen and use the provided menu.
NBER
May 2021
Corporate bond markets proved remarkably resilient against a sharp contraction caused by the 2020 Covid-19 pandemic. We document three important findings: (1) bond issuance increased immediately when the contraction hit,…
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Georgia Law Review
May 2021
The 2008 financial crisis exposed a longstanding problem in financial regulation: traditional regulatory strategies tend to be procyclical. That is, regulatory tools—most notably, bank capital requirements—incentivize excessive credit growth during…
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SSRN
July 18, 2020
We measure popular sentiment toward finance using a computational linguistics approach applied to millions of books published in eight countries over hundreds of years. We document persistent differences in finance…
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Mercatus Center
July 20, 2020
The Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly known as Dodd-Frank), which was intended to address perceived problems in the financial system and prevent future crises, is the…
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NBER
July 2020
We analyze the determinants and the long-run consequences of government interventions in the eurozone banking sector during the 2008/09 financial crisis. Using a novel and comprehensive dataset, we document that…
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NBER
May 2020
In March of 2020, banks faced the largest increase in liquidity demands ever observed. Firms drew funds on a massive scale from pre-existing credit lines and loan commitments in anticipation…
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Journal of Financial Stability
December 2019
This paper compares the out-of-sample predictive performance of different early warning models for systemic banking crises using a sample of advanced economies covering the past 45 years. We compare a…
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Journal of Banking and Finance
February 2019
We examine the cleansing effect of financial crises via their contribution to the exit of inefficient US commercial banks from 1984 to 2013. We find a larger increase in the…
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NBER
September 2019
Recent evidence suggests an increasing risk of natural disasters of the magnitude of hurricane Katrina and Sandy. Concurrently, the number and volume of flood insurance policies has been declining since…
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American Economic Review
2019
We study the market for ratings agencies in the commercial mortgage backed securities sector leading up to and including the financial crisis of 2007–2008. Using a structural model adapted from…
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Levy Economics Institute
July 2019
The 2008 crisis created a need to rethink many aspects of economic theory, including the role of public intervention in the economy. On this issue, we explore the Barro-Ricardo equivalence,…
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Journal of Financial Stability
August 2018
We propose a contingent clawback bond (COCLA) as an alternative source of contingent convertible capital (CoCo). We develop a utility maximization model in which a bank manager faces the following…
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AEA Papers and Proceedings
May 2019
Over the last decade, macroprudential policy has made important advances and become more widely used. We have a better understanding of its goals and tools, and are accumulating evidence that…
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NBER
May 2019
Liquidity shocks transmitted through interbank connections contributed to bank distress during the Great Depression. New data on interbank connections reveal that banks were much more likely to close when their…
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This paper studies the country-level reaction of bank credit default swap (“CDS”) spreads and stock prices to bailout announcements in the US and five European countries in October 2008. Bailouts…
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Journal of Financial Stability
April 2019
We construct theory-based measures of systemic bank shocks. These measures complement banking crisis indicators employed in many empirical studies, which we show capture (lagged) policy responses to systemic bank shocks….
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Journal of Financial Stability
May 17th 2019
We propose a distress measure for national banking systems that incorporates not only banks’ CDS spreads, but also how they interact with the rest of the global financial system via…
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The Federal Reserve
May 2019
This report presents the Federal Reserve Board’s current assessment of the resilience of the U.S. financial system. By publishing this report, the Board intends to promote public under- standing and…
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Basel Committee on Banking Supervision
March 20, 2019
“This report presents the results of the Basel Committee’s latest Basel III monitoring exercise, based on data as of 30 June 2018. Through a rigorous reporting process, the Committee regularly…
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Federal Reserve Bank of New York
February 2019
While both size and complexity are important for the largest U.S. bank holding companies (BHCs), specific types of complexity and their patterns across banks are not well understood. We introduce…
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University of Maryland
January 3, 2017
Economic recoveries can be slow, fast, or involve double dips. This paper provides an explanation based on the dynamic interactions between bank lending standards and firm entry selection. In the…
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NBER
November 2018
Most economists differ, not on the causes of the Great Recession, but on their relative importance. They concur, though, on the basic problem, namely human, not market failure. This study…
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Pro-Market
December 17, 2018
In any search for policies that slow growth and drive inequality, financial regulation is an obvious place to start. After all, the financial sector was Ground Zero for the worst…
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Board of Governors of the Federal Reserve System
October 12, 2018
With the national unemployment rate running below 4 percent, the possibility that an overheated economy could lead to financial imbalances, which in turn could generate or amplify economic distress, has…
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Board of Governors of the Federal Reserve System
October 12, 2018
An overheated economy has the potential to lead to financial imbalances, which in turn could generate or amplify economic distress. In two complementary FEDS notes, we study the link between…
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The Clearing House
June 29, 2018
Yesterday, the Federal Reserve released the results of the 2018 Comprehensive Capital Analysis and Review (CCAR). As described in previous TCH’s posts, the 2018 results were crucially driven by the…
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United States Government Accountabilty Office
January 2019
Banking regulators such as the Office of the Comptroller of the Currency (OCC) can implement policies to address the risk of regulatory capture. The objectives of these policies include reducing…
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NBER
June 2018
In canonical models with financial constraints, the possibility of fire sales creates a pecuniary externality that results in ex-ante overinvestment. I show that this result is sensitive to the microfoundations…
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FEDS Notes
June 07, 2019
In this study, we provide a measure of the severity of the 2014-2018 US supervisory stress tests, and examine how that severity measure has evolved. Since the passage of the…
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Federal Reserve Bank of St. Louis
July 2014
We present a model in which households facing income and housing-price shocks use long-term mortgages to purchase houses. Interest rates on mortgages reflect the risk of default. The model accounts…
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Journal of Financial Stability
October 2018
This study reports estimates of the marginal benefits and costs of increasing the regulatory minimum bank equity-to-asset “leverage ratio” from 4 to 15 percent. Benefits arise from reducing the probability…
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NBER
June 2018
We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but may not be implementable. First, when expected…
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Journal of Financial Stability
February 2019
According to “Schwartz’s conventional wisdom” and what has been called “divine coincidence”, price stability should imply macroeconomic and financial stability. However, in light of the global financial crisis, with monetary…
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NBER
June 2018
Since the onset of the Great Recession, an explosion of both theoretical and empirical research has investigated how the financial crisis emerged and how it was transmitted to the real…
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NBER
June 2018
Bank failures are generally liquidity as well as solvency events. Whether it is households running on banks or banks running on banks, defunding episodes are full of drama. This theater…
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Management Science
January 19, 2018
This paper analyzes the relationship between bank lobbying and supervisory decisions of regulators and documents its moral hazard implications. Exploiting bank-level information on the universe of commercial and savings banks…
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Cato Institute
July 30, 2019
Since the 2008 financial crisis, banking regulators’ capital enhancement efforts have focused on permitting systemically important financial institutions to issue alternative forms of debt and quasi-debt instruments as a means…
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The Clearing House
June 2018
This note proposes a recalibration of the global systemically important bank holding company (GSIB) capital surcharge that takes into account the impact of the liquidity coverage ratio (LCR) – one…
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NBER
June 2018
Banks’ ratio of the market value to book value of their equity was close to 1 until the 1990s, then more than doubled during the 1996-2007 period, and fell again…
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Center for American Progress
July 18, 2019
This report starts by outlining the lax oversight of nonbank financial companies and the systemic-risk regulatory gaps that existed before the 2007–2008 financial crisis. Next, the report charts the development…
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NBER
June 2018
We provide new, time-varying estimates of the housing wealth effect back to the 1980s. We exploit systematic differences in city-level exposure to regional house price cycles to instrument for house…
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Journal of Financial Stability
January 2011
We investigate whether the introduction of fixed-price U.S. federal deposit insurance in 1933 increased the risk-taking of banks over the succeeding period. We examine 60 financial institutions and find that…
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NBER
April 2019
Nominal stock prices are arbitrary. Therefore, when evaluating how a piece of news should affect the price of a stock, rational investors should think in percentage rather than dollar terms….
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Bank for International Settlements
September 2011
At moderate levels, debt improves welfare and enhances growth. But high levels can be damaging. When does debt go from good to bad? We address this question using a new…
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Center for Retirement Research
January 2019
Does the use of assumed investment returns to value liabilities and calculate required contributions lead public pension plans to invest more in risky assets? The analysis finds that, even after…
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Journal of Financial Stability
October 2015
This paper provides a comprehensive, global database of deposit insurance arrangements as of 2013. We extend our earlier dataset by including recent adopters of deposit insurance and information on the…
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CEPR
June 2019
Financial crisis can trigger policy reversals, i.e. they can lead to a process of re- regulation of financial markets. Using a recent comprehensive dataset on financial liberalization across 94 countries…
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NBER
September 2018
We provide direct evidence of leverage-induced fire sales contributing to a market crash using account-level trading data for brokerage- and shadow-financed margin accounts during the Chinese stock market crash of…
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NBER
August 2006
We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find…
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NBER
March 2019
This paper argues that the debt forgiveness provided by the U.S. consumer bankruptcy system helped stabilize employment levels during the Great Recession. We document that over this period, states with…
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AEI
April 2, 2019
Since the 2009 Supervisory Capital Assessment Program (SCAP), US regulators have employed a representative bank model as the benchmark of comparison in mandatory stress test exercises. For risk management functions,…
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April 2019
In addressing the stated topics, the RTF-CCyB work stream aimed at shedding light on some of the relevant mechanisms and likely implications for bank lending and the broader economy. The…
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Journal of Financial Stability
August 2018
Multi-year forecasts of bank performance under stressful economic conditions determine large institution regulatory capital requirements and yet the accuracy of these forecasts is undocumented. I compare the accuracies of alternative…
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Liberty Street Economics
July 16, 2018
The Tax Cuts and Jobs Act (TCJA) is expected to increase after-tax profits for most companies, primarily by lowering the top corporate statutory tax rate from 35 percent to 21…
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AEI
April 2, 2019
Since the 2009 Supervisory Capital Assessment Program (SCAP), US regulators have employed a representative bank model as the benchmark of comparison in mandatory stress test exercises. For risk management functions,…
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Forthcoming
July 8, 2019
The Great Recession during the late 2000s and early 2010s has led to a strengthening of macroprudential policies over the world in order to address systemic risk concerns. However, the…
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CEPR
July 2019
After the boom in US subprime lending came the bust – with a run on US shadow banks. The magnitude of boom and bust were, it seems, amplified by two…
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Journal of Financial Stability
January 2011
This paper examines the interaction between monetary policy and financial stability and provides an assessment of the implications of banks’ risk management practices for monetary policy. By considering the desire…
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Bank of England
November 9, 2018
We quantify the size of a fire-sale externality in the derivatives market in the absence of a macroprudential buffer on top of microprudential initial margin requirements. We show how this…
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We analyze the competitive effects of government bail-out policies in two models with different degrees of transparency in the banking sector. Our main result is that bail-outs lead to higher…
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BIS
June 24, 2019
In 2010, the Basel Committee on Banking Supervision published an assessment of the long-term economic impact (LEI) of stronger capital and liquidity requirements (BCBS (2010)). This paper considers this assessment…
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Financial Stability Board
October 15, 2014
When the FSB adopted the Key Attributes in 2011 it was agreed to develop further guidance on their implementation, taking into account the need for implementation to accommodate different national…
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NBER
July 2018
The Financial Crisis began and accelerated in short-term money markets. One such market is the multi-trillion dollar sale-and-repurchase (“repo”) market, where prices show strong reactions during the crisis. The academic…
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NBER
September 2019
Recent evidence suggests an increasing risk of natural disasters of the magnitude of hurricane Katrina and Sandy. Concurrently, the number and volume of flood insurance policies has been declining since…
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American Economic Journal: Macroeconomics
April 2021
Financial innovation in recent decades has expanded portfolio choice. We investigate how greater choice affects investors’ savings and asset returns. We establish a choice channel by which greater portfolio choice…
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Liquidity Transformation and Fragility in the US Banking Sector
September 1 2020
This paper provides, for the first time, large-scale evidence that liquidity transformation by banks creates fragility, as their uninsured depositors face an incentive to withdraw their money before others (a…
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NBER
October 2020
Liquidity provision is a bet against private information: if private information turns out to be higher than expected, liquidity providers lose. Since information generates volatility, and volatility co-moves across assets,…
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Global Business and Financial Cycles: A Tale of Two Capital Account Regimes
August 2020
Using a new equity price-based measure of the global financial cycle, this paper evaluates the relative importance of global financial shocks for quarterly equity returns and output growths in a…
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Journal of Economic Perspectives
January 2019
This article assesses the accomplishments, unfinished business, and outstanding issues in the post-crisis approach to prudential regulation. After briefly reviewing how the ongoing integration of capital markets and traditional lending…
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NBER
September 2020
We propose a novel conceptual approach to transparently characterizing credit market outcomes in economies with multi-dimensional borrower heterogeneity. Based on characterizations of securities’ implicit demand for bank equity capital, we…
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Levy Economics Institute
March 2021
It is widely agreed that the Nasdaq during the dot-com era 20 years ago was a full-fledged stock market bubble. Recently, the US stock market according to many metrics has…
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Levy Economics Institute
September 2020
The COVID-19 crisis paralyzed huge parts of the planet in weeks. It not only infected the population but injected a gargantuan dose of uncertainty into the system. In that regard,…
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NBER
October 2020
Maintaining sufficient liquidity in the financial system is vital for its stability. However, since returns on liquid assets are typically low, individual financial institutions may seek to hold fewer such…
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Structuring Mortgages for Macroeconomic Stability
August 2020
We study mortgage design features aimed at stabilizing the macroeconomy. We model overlapping generations of mortgage borrowers and an infinitely lived risk-averse representative mortgage lender. Mortgages are priced using an…
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Federal Reserve
April 2021
The widespread economic damage caused by the ongoing COVID-19 pandemic poses the first major test of the bank regulatory reforms put in place following the global financial crisis. This study…
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The International Aspects of Macroprudential Policy
August 2020
Countries are using macroprudential tools more actively with the goal of improving the resilience of their broader financial systems. A growing body of evidence suggests that these tools can accomplish…
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NBER
October 2020
In this paper, we explore dynamic changes in the capitalization of sea level rise (SLR) risk in housing and mortgage markets. Our results suggest a disconnect in coastal Florida real…
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NBER
September 2020
The effect of financial crises on innovation is an unsettled and important question for economic growth, but one difficult to answer with modern data. Using a differences-in-differences design surrounding the…
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NBER
October 2020
The firms listed on the stock market in aggregate as well as the top market capitalization firm contribute less to total non-farm employment and GDP now than in the 1970s….
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American Economic Journal: Macroeconomics
April 2021
We use quasi-random access to the Home Affordable Refinance Program (HARP) to identify the causal effect of refinancing into a lower-rate mortgage on borrower balance sheet outcomes. Refinancing substantially reduces…
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SSRN
17 March 2021
Was the mortgage boom fueled by optimism around house prices, or did misaligned incentives in the mortgage industry also play a role? In this paper, we provide novel evidence of…
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Journal of Banking & Finance
September 2019
We examine the cleansing effect of financial crises via their contribution to the exit of inefficient US commercial banks from 1984 to 2013. We find a larger increase in the…
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NBER
July 2019
The paper uses bank- and instrument-level data on asset holdings and liabilities to identify and estimate a general equilibrium model of trade in financial instruments. Bilateral ties are formed as…
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NBER
July 2019
Short-term debt that can serve as a medium of exchange is designed to be information insensitive. No one should be tempted to acquire private information to gain an informational advantage…
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Bank for International Settlements
March 2019
This special feature is structured as follows. First, we present the main features of a public repository of studies on the effects of bank regulations, called FRAME (Financial Regulation Assessment:…
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VoxEU
March 2019
In the past 30 years, defaults on corporate bonds in the US have been substantially above the historical average. Using firm-level data, this column shows that the increase in credit…
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NBER
July 2019
Financial network structure is an important determinant of systemic risk. This paper examines how the U.S. interbank network evolved over a long and important period that included two key events:…
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Journal of Economic Perspectives
December 2018
In this essay, I will review the key sources of fragility in the core financial system. The first section focuses on the weakly supervised balance sheets of the largest banks…
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CEPR
May 2019
Applying standard portfolio-sort techniques to bank asset returns for 15 countries from 2004 to 2018, we uncover a risk premium associated with implicit government guarantees. This risk premium is intimately…
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Federal Reserve Bank of Philadelphia
February 2019
The Great Recession led to widespread mortgage defaults, with borrowers resorting to both foreclosures and short sales to resolve their defaults. I first quantify the economic impact of foreclosures relative…
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VoxEU
March 27, 2019
Various factors have been advanced as possible causes of the build-up of risks leading to the Global Crisis, and multiple policies have been put forward to address them. This column…
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NBER
March 2019
The risk premium puzzle is worse than you think. Using a new database for the U.S. and 15 other advanced economies from 1870 to the present that includes housing as…
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IMF
April 2019
This paper takes stock of the global economic recovery a decade after the 2008 financial crisis. Output losses after the crisis appear to be persistent, irrespective of whether a country…
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May 2019
NBER
We explore the actions of financially distressed banks in two distinct periods that include financial crises (1985-1994, 2005-2014) and differ in bank regulations, especially concerning capital requirements and enforcement. In…
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Bank of England
February 2019
We study the impact of higher capital requirements on banks’ decisions to grant collateralized rather than uncollateralized loans. We exploit the 2011 EBA capital exercise, a quasi-natural experiment that required…
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The Finance Innovation Lab
July 3, 2018
We are living through a period of major political and economic uncertainty. While Brexit and new global forces reshape our economy, the rise of digital technologies could set our financial…
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NBER
March 2019
Stress tests applied to individual institutions are an important tool for evaluating financial resilience. However, financial systems are typically complex, heterogeneous and rapidly changing, raising questions about the adequacy of…
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Journal of Financial Stability
August 2014
We analyze the capital market assessment of bank risk factors in Europe and the United States for the 1990–2011 period. The focus is on bank stock returns in a multi-factor…
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Financial Stability Board
November 30, 2017
Bail-in within resolution is a core part of resolution strategies of global systemically important banks (G-SIBs). It refers to the write-down and/or conversion of liabilities into equity and helps implement…
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Brookings
July 9, 2019
The macroprudential elements of the stress tests arise from: the scenario design, which is set to vary over time with the economic and financial cycles; the requirement to hold portfolios…
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