This paper presents a stylized framework of bank risk-taking to help clarify the concept of "double materiality," the idea that supervisory authorities should consider both the risks that banks face from climate change and the impact of a bank’s actions on climate change. The paper shows...

We estimate the causal effects of heroin use on labor market outcomes by proxying for heroin use with prior exposure to oxycodone, the largest of the prescription opioids with a well-documented history of abuse. After a nationwide tightening in the supply of oxycodone in 2010, states with...

Our paper studies the role of the collateral channel for bank credit using confidential bank-firm-loan data. We estimate that for a 1 percent increase in collateral values, firms pledging real estate collateral experience a 12 basis point higher growth in bank lending with higher sensitivities...

Credit default swaps (CDS) are the most common type of credit derivative. This paper provides a brief history of the CDS market and discusses its main characteristics. After describing the basic mechanics of a CDS, I present a simple valuation framework that focuses on the relationship between...

The use of stress testing for macroprudential objectives is advanced by modeling spillovers within the financial sector or between the real and financial sectors. In this chapter, we discuss several macroprudential elements that capture these spillovers and how they might be added to stress test...

In response to immense strains in the asset-backed securities market in 2008 and 2020, the Federal Reserve and the U.S. Treasury twice launched the Term Asset-Backed Securities Loan Facility (TALF). TALF was an unusual crisis facility because it provided loans to a wide range of nonbank...

Even though workers in the UK spent just 1,000 pounds on commuting in 2017, the economic loss may be far higher because of the congestion externality arising from the way in which one worker's commute affects the commuting time of others. I provide empirical evidence that commuting time affects...

Focusing on some key metrics of bank performance, such as revenues and loan charge-off rates, we estimate the fraction of the observed variation in these metrics that can be attributed to changes in economic conditions. Macroeconomic factors can explain the preponderance of the fluctuations in...

We introduce a new dataset of real gross domestic product (GDP) growth and core personal consumption expenditures (PCE) inflation forecasts produced by the staff of the Board of Governors of the Federal Reserve System. In contrast to the eight Greenbook forecasts a year the staff produces for...

We build a quantitatively relevant macroeconomic model with endogenous risk-taking. In our model, deposit insurance and limited liability can lead banks to make risky loans that are socially inefficient. This excessive risk-taking can be triggered by aggregate or sectoral shocks that reduce the...