Too Much Finance?
This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. We use different empirical approaches to show that there [...]
Cross-Country Evidence on the Link between Volatility and Growth
This paper presents empirical evidence against the standard dichotomy in macroeconomicsthat separates growth from the volatility of economic fluctuations. In a sample of 92 countries as well as a sample [...]
Beyond Leveraged Losses: The Balance Sheet Effects of the Home Price Downturn
This paper quantifies the impact of declining home prices, increasing mortgage credit losses, and the associated reduction in credit supply on real GDP growth. Using a state-level panel analysis, I [...]
Financial Regulation in a System Context
The global financial crisis raises questions about the proper objectives of financial regulation and how best to meet them. Traditionally, capital requirements have been the cornerstone of bank regulation. However, [...]
Making Sense of the Subprime Crisis
Should market participants have anticipated the large increase in home foreclosures in 2007 and 2008? Most of these foreclosures stemmed from mortgage loans originated in 2005 and 2006, raising suspicions [...]
Regulating the Shadow Banking System
The shadow banking system played a major role in the recent financial crisis but remains largely unregulated. We propose principles for its regulation and describe a specific proposal to implement [...]
Efficient Credit Policies in a Housing Debt Crisis
Consumption, income, and home prices fell simultaneously during the financial crisis, compounding recessionary conditions with liquidity constraints and mortgage distress. We develop a framework to guide government policy in response [...]
Understanding Bank Risk through Market Measures
Since the financial crisis, there have been major changes in the regulation of large banks directed at reducing their risk. Measures of regulatory capital have substantially increased; leverage ratios have [...]
Strenthening and Streamlining Bank Capital Regulation
We propose three core principles that should inform the design of bank capital regulation. First, whenever possible, multiple constraints on the minimum level of equity capital should be consolidated into [...]
The Transformation of the U.S. Banking Industry: What a Long, Strange Trip It’s Been
This paper summarizes and quantifies past changes in the U.S. commercial banking industry and forecasts what the future may hold. It emphasizes regulatory changes and technical and financial innovations as [...]