Our results indicate that financial liberalization increases bank risk-taking in both developed and developing countries but through different channels. Financial liberalization promotes stronger bank competition that increases risk-taking incentives in [...]
In the early stages of the crisis, troubled institutions facing runs were dealt with through a scattered blend of voluntary mergers, outright closures, and bailouts. By late September 2008 and [...]
The financial crisis was a systemic run. Hence, the central regulatory response should be to eliminate run-prone securities from the financial system. By contrast, current regulation guarantees run-prone bank liabilities [...]
We critically review the state of the art in macro stress testing, assessing its strengths and weaknesses. We argue that, given current technology, macro stress tests are ill-suited as early [...]
This working paper, entitled Assessing Funding Costs and the Net Impact of Government Policy on Large Banks, presents a framework for evaluating existing evidence on bank funding costs, as well [...]
This paper contributes to the empirical literature on risk shifting. It proposes a method to find out whether risk shifting is present in the banking industry and, if so, what [...]
We analyze the emergence of systemic risk in a network model of interconnected bank balance sheets. The model incorporates multiple sources of systemic risk, including size of financial institutions, direct [...]
In this paper, we investigate how the introduction of complex, model-based capital regulation affected credit risk of financial institutions. Model-based regulation was meant to enhance the stability of the financial [...]
Minimum capital regulations play a central role in banking regulation. Regulators require banks to maintain capital above a certain level in order to correct incentives to make excessively risky loans [...]
We investigate whether homeowners respond strategically to news of mortgage modification programs. We exploit plausibly exogenous variation in modification policy induced by U.S. state government lawsuits against Countrywide Financial Corporation, [...]