reference library

/reference library
reference library2018-06-08T14:23:35-07:00

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.

Policy uncertainty and the maturity structure of corporate debt

Sudip Datta, Trang Doan, and Mai Iskandar-Datta/p>

Journal of Financial Stability

October 2019

This study examines the effect of policy uncertainty on corporate debt maturity structure. We find that elevated levels of policy uncertainty lead firms to shorten debt maturity, indicating that firms…
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Does machine learning help us predict banking crises?

Johannes Beutel, Sophia List, and Gregorvon Schweinitz

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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Is the CRA Still Relevant to Mortgage Lending?

Paul Calem, Lauren Lambie-Hanson, and Susan Watcher

Penn Institute for Urban Regulation

September 2019

Market share of conforming-size, home purchase mortgage originations has steadily and substantially shifted from banking institutions to nonbank lenders over recent years. In 2017, nonbanks originated more than 1.8 million…
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Do financial crises cleanse the banking industry? Evidence from US commercial bank exits

Laima Spokeviciute, KevinKeasey, and Francesco Vallascas

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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Mortgage Finance in the Face of Rising Climate Risk

Amine Ouazad and Matthew E. Kahn

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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Competition and Strategic Incentives in the Market for Credit Ratings: Empirics of the Financial Crisis of 2007

Chenghuan Sean Chu and Marc Rysman

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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Making Sense of the Barro-Ricardo Equivalence in a Financialized World

Lorenzo Esposito and Giuseppe Mastromatteo

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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The Monetary Basis of Bank Supervision

Lev Menand

SSRN

July 17, 2019

A series of statutory provisions codified at Title 12 of the U.S. Code empower special government officials known as supervisors to examine banks and tell bankers what to do, not…
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The Value of Intermediation in the Stock Market

Marco Di Maggio, Mark L. Egan, and Francesco Franzoni

NBER

August 2019

Brokers continue to play a critical role in intermediating institutional stock market transactions. More than half of all institutional investor order flow is still executed by high-touch (non-electronic) brokers. Despite…
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Jumbo rates are below conforming rates: When did this happen and why?

Stephen D. Oliner, Lynn M. Fisher, Tobias Peter, and Mike Fratantoni

American Enterprise Institute

August 6, 2019

Pre-crisis estimates of the jumbo-conforming spread, utilizing a variety of methodologies, ranged from 10 to 25 basis points. In the post-crisis period, this spread has decreased and has been negative…
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Corporate bond clawbacks as contingent capital for banks

Fernando Díaz, Gabriel G. Ramirez, and Luiling Liu

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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Macroprudential Policy: What We’ve Learned, Don’t Know, and Need to Do

Kristin J. Forbes

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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The Effect of House Prices on Household Borrowing: A New Approach

James Cloyne, Kilian Huber, Ethan Ilzetzki and Henrik Kleven

American Economic Review

May 2019

We investigate the effect of house prices on household borrowing using administrative mortgage data from the United Kingdom and a new empirical approach. The data contain household-level information on house…
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A Macroeconomic Model of Price Swings in the Housing Market

Carlos Garriga, Rodolfo Manuelli, and Adrian Peralta-Alva

American Economic Review

May 2019

This paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions. We establish theoretically that reductions…
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Interbank Connections, Contagion and Bank Distress in the Great Depression

Charles W. Calomiris, Matthew S. Jaremski, and David C. Wheelock

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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Communication within Banking Organizations and Small Business Lending

Ross Levine, Chen Lin, Qilin Peng, and Wensi Xie

NBER

May 2019

We investigate how communication within banks affects small business lending. Using travel time between a bank’s headquarters and its branches to proxy for the costs of communicating soft information, we…
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How Do Mortgage Refinances Affect Debt, Default, and Spending? Evidence from HARP

Joshua Abel and Andreas Fuster

Joint Center for Housing Studies of Harvard University

May 15, 2019

This paper seeks to refine our understanding of how refinancing a mortgage affects household outcomes. This issue has attracted particular attention in the wake of the Great Recession, however, there…
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Time to buy or just buying time? Lessons from October 2008 for the cross-border bailout of banks

Author name here

Publication name here

Publication date here

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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Banking crises and crisis dating: Disentangling shocks and policy responses

John H. Boyd, Gianni De Nicolò, and Tatiana Rodionova

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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Measuring contagion risk in international banking

S. Avdjiev, P. Giudici, and A. Spelta

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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May 2019 Financial Stability Report

Board of Governors of the Federal Reserve System

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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What Insights Do Taxi Rides Offer into Federal Reserve Leakage?

David Andrew Finer

Chicago Stigler Center

March 2018

In this paper, I employ anonymous New York City yellow taxi records to infer variation in interactions between insiders of the Federal Reserve Bank of New York (New York Fed)…
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Basel III Monitoring Report

Basel Committee

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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Complexity in Large U.S. Banks

Linda Goldberg and April Meehl

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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Recovery Dynamics: An Explanation from Bank Screening and Entrepreneur Entry

Yunzhi Hu

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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The Big Con – Reassessing the “Great” Recession and its “Fix”

Laurence J. Kotlikoff

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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How Regulation Subsidizes Big Finance

Brink Lindsey and Steven Teles

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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The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Quantitative Exploration

Elena Afanasyeva, Seung Jung Lee, Michele Modugno, Francisco Palomino

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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The Relationship between Macroeconomic Overheating and Financial Vulnerability: A Narrative Investigation

Elena Afanasyeva, Seung Jung Lee, Michele Modugno, Francisco Palomino

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 Fed Increases Large Banks’ Capital Requirements

Francisco Covas, Brett Waxman, and Robert Lindgren

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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Why Does Credit Growth Crowd Out Economic Growth?

Stephen G. Cecchetti and Enisse Kharroubi

NBER

September 2018

We examine the negative relationship between the rate of growth in credit and the rate of growth in output per worker. Using a panel of 20 countries over 25 years,…
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Large Bank Supervision: OCC Could Better Address Risk of Regulatory Capture

United States Government Accountability Office

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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How I Learned to Stop Worrying and Love Fire Sales

Pablo Kurlat

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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Financial Globalization and the Welfare State

Assaf Razin and Efraim Sadka

NBER

June 2018

The economic link between globalization and income distribution has been rigorously studied from the perspectives of the international-trade paradigm. However, the international-trade viewpoint does not address the impact of globalization…
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Cyclicality and the Severity of the U.S. Supervisory Stress Test: 2014 to 2018

Jose Berrospide, Andrew Cohen, Ronel Elul, David Hou, Aytek Malkhozov, Marc Rodriguez, and Robert Sarama

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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Mortgage Defaults

Juan Carlos Hatchondo, Leonardo Martinez, and Juan M. Sanchez

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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Benefits and costs of a higher bank “leverage ratio”

James R. Barth and Stephen Matteo Miller

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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Bank Resolution and the Structure of Global Banks

Patrick Bolton and Martin Oehmke

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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Central Bank’s Preferences and Banking Sector Vulnerability

G. Levieuge, Y. Lucotte, and F. Pradines-Jobet

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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What Happened: Financial Factors in the Great Recession

Mark Gertler and Simon Gilchrist

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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Banks as Potentially Crooked Secret-Keepers

Timothy Jackson and Laurence J. Kotlikoff

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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Financial structure and income inequality

Michael Brei, Giovanni Ferri, and Leonardo Gambacorta

Bank for International Settlements

November 15, 2018

This paper empirically investigates the link between financial structure and income inequality. Using data for a panel of 97 economies over the period 1989-2012, we find that the relationship is…
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Evaluation of the Effects of Financial Regulatory Reforms on Small and Medium-Sized Enterprise (SME) Financing

Financial Stability Board

June 7, 2019

With the main elements of the G20 reforms agreed and implementation underway, an analysis of the effects of these reforms is becoming possible. To that end, the FSB developed a…
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Central Banking for All: A Public Option for Bank Accounts

Morgan Ricks, John Crawford, and Lev Menand

The Great Democracy Initiative

June 2018

Among the perks of being a bank is the privilege of holding an account with the central bank. Unavailable to individuals and nonbank businesses, central bank accounts pay higher interest…
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Bank Capitalization and Loan Growth

Francisco Covas

The Clearing House

December 2016

A few academic papers have recently indicated that banks with a greater amount of capital tend to lend more as a result of lower funding costs. This evidence has been…
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Lobbying on Regulatory Enforcement Actions: Evidence from U.S. Commercial and Savings Banks

Thomas Lambert

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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Bailouts, Capital, or CoCos: Can Contingent Convertible Bonds Help Banks Cope with Financial Stress?

Robert A. Eisenbeis

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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Estimating How Basel III Liquidity Requirements Should Affect a GSIB Surcharge

Francisco Covas and Robert Lindgren

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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Government Guarantees and the Valuation of American Banks

Andrew G. Atkeson, Adrien d'Avernas, Andrea L. Eisfeldt, Pierre-Olivier Weill

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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Strengthening the Regulation and Oversight of Shadow Banks

Gregg Gelzinis

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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Federal Reserve Structure, Economic ideas, and Monetary and Financial Policy

Michael D. Bordo

Hoover Institution Economics Working Papers

June 17, 2019

The decentralized structure of the Federal Reserve System is evaluated as a mechanism for generating and processing new ideas on monetary and financial policy. The role of the Reserve Banks…
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Will Paying Interest on Reserves Endanger the Fed’s Independence?

Robert Heller

Cato Institute

September 2019

As a consequence of the large-scale asset purchases by the Federal Reserve during its quantitative easing operations that began during the Great Recession in 2008, the Fed’s interest income increased…
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Housing Wealth Effects: The Long View

Adam M. Guren, Alisdair McKay, Emi Nakamura, Jón Steinsson

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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Did the Introduction of Fixed-Rate Federal Deposit Insurance Increase Long-Term Bank Risk-Taking?

Gayle Delong and Anthony Saunders

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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Can the Market Multiply and Divide? Non-Proportional Thinking in Financial Markets

Kelly Shue and Richard Townsend

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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The Marginal Effect of Government Mortgage Guarantees on Homeownership

Serafin Grundl and You Suk Kim

Federal Reserve

February 27, 2019

The U.S. government guarantees a majority of residential mortgages, which is often justified as a means to promote homeownership. In this paper we use property-level data to estimate the effect…
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Comprehensive Capital Analysis and Review 2019: Assessment Framework and Results

Board of Governors of the Federal Reserve System

June 2019

This annual assessment consists of two primary components: The Dodd-Frank Act stress test (DFAST) is a forward-looking quantitative evaluation of bank capital that demonstrates how a hypothetical set of stressful…
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‘Since You’re So Rich, You Must Be Really Smart’: Talent and the Finance Wage Premium

Michael J Böhm, Daniel Metzger, and Per Johan Strömberg

Swedish House of Finance Working Paper

June 4, 2018

Financial sector wages increased extraordinarily over the last decades. An explanation for this trend is that skill demand rose more in finance than other sectors. We use Swedish administrative data,…
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Macroprudential Policy, Leverage, and Bailouts

Allan M. Malz

Cato Institute

September 2019

Reliance on macroprudential tools is problematic in several ways. First, in spite of reforms to the regulation of bank capital, high leverage, regulatory complexity, and public-sector guarantees continue to be…
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The Real Effects of Debt

Stephen G Cecchetti, M S Mohanty, and Fabrizio Zampolli

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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Impact of Public Sector Assumed Returns on Investment Choices

Jean-Pierre Aubry and Caroline V. Crawford

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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The Community Reinvestment Act in the Age of Fintech and Bank Competition

Diego Zuluaga

Cato Institute

July 10, 2019

The Community Reinvestment Act (CRA) requires banks to lend to low- and moderate-income (LMI) households in the areas where they take deposits. But it has become obsolete. When the CRA…
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Deposit Insurance Around the World: A Comprehensive Analysis and Database

Asli Demirgüç-Kunt, Edward Kane, and Luc Laeven

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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Financial Crises and Liberalisation: Progress or Reversals?

Nauro F Campos, Paul De Grauwe, Yuemei Ji, Angelo Martelli, and Orkun Saka

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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Leverage-Induced Fire Sales and Stock Market Crashes

Jiangze Bian, Zhiguo He, Kelly Shue, and Hao Zhou

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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Accounting for Fannie Mae and Freddie Mac in the Federal Budget

Congressional Budget Office

September 18, 2018

Fannie Mae and Freddie Mac were originally chartered as government-sponsored enterprises (GSEs) to ensure a stable supply of credit for mortgages nationwide. They dominate the secondary (resale) market for residential…
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The Cost of Banking Regulation

Luigi Guiso, Paola Sapienza, and Luigi Zingales

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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Macroeconomic Effects of Debt Relief: Consumer Bankruptcy Protections in the Great Recession

Adrien Auclert, Will S. Dobbie, Paul Goldsmith-Pinkham

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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Policy uncertainty, financial stability, and stress testing

Paul H. Kupiec

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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Towards a Sectoral application of the countercyclical capital buffer

Basel Committee on Banking Supervision

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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On the accuracy of alternative approaches for calibrating bank stress test models

Paul H. Kupiec

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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Tax Reform’s Impact on Bank and Corporate Cyclicality

Diego Aragon, Anna Kovner, Vanesa Sanchez, and Peter Van Tassel

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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Policy uncertainty, financial stability, and stress testing

Paul H. Kupiec

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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Macroprudential and Monetary Policies: The Need to Dance the Tango in Harmony

Jose David Garcia Revelo, Yannick Lucotte, and Florian Pradines-Jobet

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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Externalities and Financial Crisis – Enough to Cause Collapse?

Marcus Miller and Lei Zhang

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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Financial Stability, Interest Rate Smoothing and Equilibrium Determinacy

Giorgio Di Giorgio and Zeno Rotondi

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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The Misguided Beliefs of Financial Advisors

Juhani T. Linnainmaa, Brian Melzer, and Alessandro Previtero

Kelley School of Business

May 16, 2018

A common view of retail finance is that conflicts of interest contribute to the high cost of advice. Within a large sample of Canadian financial advisors and their clients, however,…
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Macroprudential margins: a new countercyclical tool?

Cian O’Neill and Nicholas Vause

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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Banks Without Parachutes: Competitive Effects of Government Bail-Out Policies

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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The Costs and Benefits of Bank Capital – A Review of the Literature

Basel Comittee on Banking Supervision

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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Key Attributes of Effective Resolution Regimes for Financial Institutions

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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The Run on Repo and the Fed’s Response

Gary Gorton, Toomas Laarits, and Andrew Metrick

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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The Securities Industry in New York City

Securities industry pretax profits grew by 42 percent in 2017 on higher revenue from core activities. That momentum has carried into 2018, with profits rising by 11 percent during the…
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Mortgage Finance in the Face of Rising Climate Risk

Amine Ouazad, Matthew E. Kahn

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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Financial Regulation: Still Unsettled a Decade After the Crisis

Daniel K. Tarullo

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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Luck Versus Skill in the Cross Section of Mutual Fund Returns

Eugene F. Fama and Kenneth R. French

The Journal of Finance

October 2010

The aggregate portfolio of U.S. equity mutual funds is close to the market portfolio, but the high costs of active management show up intact as lower returns to investors. Bootstrap…
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Do financial crises cleanse the banking industry? Evidence from US commercial bank exits

Laima Spokeviciute, Kevin Keasey, and Francesco Vallascas

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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The Transmission of Shocks in Endogenous Financial Networks: A Structural Approach

Jonas Heipertz, Amine Ouazad, and Romain Rancière

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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The Information View of Financial Crises

Tri Vi Dang, Gary B. Gorton, and Bengt R. Holmstrom

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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Buffer Capital, Loan Portfolio Quality and the Performance of Microfinance Institutions: A Global Analysis

Godfred Afrifa, Ernest Gyapong, and Alaa Mansour Zalata

Journal of Finanical Stability

October 2019

Using a sample of 625 microfinance institutions (MFI) across 40 countries from 2010-2015, we empirically examine the effect of buffer capital on the performance of MFIs and how this effect…
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Restoring the Rule of Law in Financial Regulation

Charles Calomiris

Cato Journal

Fall 2018

Increasingly, our regulatory structure has been adopting processes that are inconsistent with adherence to the rule of law. These process concerns are rarely voiced by academics, but that is a…
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Impact of financial regulations: insights from an online repository of studies

Frederic Boissay, Carlos Cantu, Stijn Claessens, and Alan Villegas

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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Disruption and credit markets

Bo Becker and Victoria Ivashina

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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The Founding of the Federal Reserve, the Great Depression and the Evolution of the U.S. Interbank Network

Matthew S. Jaremski and David C. Wheelock

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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Policy News and Stock Market Volatility

Scott R. Baker, Nicholas Bloom, Steven J. Davis, and Kyle J. Kost

NBER

March 2019

We create a newspaper-based Equity Market Volatility (EMV) tracker that moves with the VIX and with the realized volatility of returns on the S&P 500. Parsing the underlying text, we…
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Prone to Fail: The Pre-Crisis Financial System

Darrell Duffie

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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Risky Bank Guarantees

Taneli Makinen, Lucio Sarno, and Gabriele Zinna

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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A Shortage of Short Sales: Explaining the Underutilization of a Foreclosure Alternative

Calvin Zhang

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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Monetary policy, macroprudential policy, and financial stability

David Martinez-Miera and Rafael Repullo

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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The Total Risk Premium Puzzle

Òscar Jordà, Moritz Schularick, and Alan M. Taylor

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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