Risk shifting in the US banking system: An empirical analysis
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 [...]
Too big to fail in banking: What does it mean?
Interest in too big to fail (TBTF) resolutions of insolvent large complex financial firms has intensified in recent years. TBTF resolutions protect some in-the-money counterparties of a targeted insolvent firm [...]
Systemic risk in an interconnected banking system with endogenous asset markets
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 [...]
How Do Bank Regulators Determine Capital Adequacy Requirements?
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 [...]
Long-Term Damage from the Great Recession in OECD Countries
This paper estimates the long-term effects of the global recession of 2008-2009 on output in 23 countries. I measure these effects by comparing current estimates of potential output from the [...]
Mortgage Modification and Strategic Behavior: Evidence from a Legal Settlement with Countrywide
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, [...]
Math Gone Mad: Regulatory Risk Modeling by the Federal Reserve
The principal purpose of these models is to determine banks’ regulatory capital requirements—the capital “buffers” to be set aside so banks can withstand adverse events and remain solvent.Risk models are [...]
The Role of Mortgage Finance in Financial (In)Stability
Empirical research on the causes of financial crises has grown in recent decades. Early work, such as that by Kaminsky and Reinhart, helped establish the link between asset prices and [...]
The Compelling Case for Stronger and More Effective Leverage Regulation in Banking
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 [...]
Reserve Requirement Policy over the Business Cycle
Based on a novel quarterly dataset for 52 countries for the period 1970-2011, we analyze the use and cyclical properties of reserve requirements (RR) as a macroeconomic stabilization tool and [...]