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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]