Excessive leverage (indebtedness) in banking endangers the public and distorts the economy. Yet current and proposed regulations only tweak previous regulations that failed to provide financial stability. This paper discusses [...]
Do banks matter for growth and how? This paper examines the effects of national banks in the United States from 1870–1900. I use the discontinuity in entry caused by a [...]
The excessive increase of leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions since it amplifies potential investment losses. [...]
During the financial crisis, life insurers sold long-term policies at deep discounts relative to actuarial value. The average markup was as low as –19 percent for annuities and –57 percent [...]
We examine banks’ loan losses in Europe in 1982–2012 using a nonlinear three-factor model that takes into account output growth, real interest rate, and the ratio of private credit to [...]
What should be our destination? We want a regulatory system that credibly requires banks to risk their stockholders’ investments, not taxpayers’ wealth. And we want to avoid permitting losses to [...]
To study the impact of macroprudential policy on credit supply cycles and real effects, we analyze dynamic provisioning. Introduced in Spain in 2000, revised four times, and tested in its [...]
This study examines Japanese banks’ behavior of adjusting denominators of capital ratios upon the introduction of Basel II regulations. The first analysis investigates the adjustments to the size and composition [...]
Unregulated U.S. corporations dramatically increased their debt usage over the past century. Aggregate leverage - low and stable before 1945 - more than tripled between 1945 and 1970 from 11% [...]
Flawed claims are still made in the policy debate, particularly in the context of proposals that banks be funded with more equity and less debt than current or new regulations [...]