Leveraged Bubbles
What risks do asset price bubbles pose for the economy? This paper studies bubbles in housing and equity markets in 17 countries over the past 140 years. History shows that [...]
Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments
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 [...]
In Defense of Derivatives: From Beer to the Financial Crisis
The losses and failures of the financial crisis of 2007- 2009, however, were predominantly the result of excessive nonderivative leverage and investments in nonderivative mortgage products that fell dramatically in [...]
Can the “Single Point of Entry” strategy be used to recapitalize a systemically important failing bank?
The Single Point of Entry (SPOE)—the FDIC strategy to implement its new Dodd–Frank Orderly Liquidation Authority (OLA)—promises to reduce the financial market turmoil caused by the failure of a large [...]
Are Capital Controls Prudential? An Empirical Investigation
A growing theoretical literature advocates the use of countercyclical capital control policy, that is, the tightening of restrictions on net capital inflows during booms and the relaxation thereof during recessions. [...]
A Century of Capital Structure: The Leveraging of Corporate America
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% [...]
As Certain as Debt and Taxes: Estimating the Tax Sensitivity of Leverage from Exogenous State Tax Changes
We use a natural experiment in the form of 121 staggered changes in corporate income tax rates across U.S. states to show that tax considerations are a first-order determinant of [...]
Maturity Rationing and Collective Short-Termism
Financing terms and investment decisions are jointly determined. This interdependence links firms' asset and liability sides and can lead to short-termism in investment. In our model, financing frictions increase with [...]
Asset Quality Misrepresentation by Financial Intermediaries: Evidence from the RMBS Market
We document that contractual disclosures by intermediaries during the sale of mortgages contained false information about the borrower's housing equity in 7–14% of loans. The rate of misrepresented loan default [...]
The effects of government capital and liquidity support programs on bank lending: Evidence from the syndicated corporate credit market
This study jointly evaluates the effects of the U.S. Treasury's Troubled Asset Relief Program (TARP), the Federal Reserve's Discount Window (DW), and Term Auction Facility (TAF) on bank syndicated lending [...]