Showing 1 - 10 of 192
Persistent link: https://www.econbiz.de/10012581810
We study how heterogeneity in banks' asset holdings affects fragility. In the model, banks face a risk of bank runs and have to liquidate long-term assets in a common market to repay runners. Liquidation prices are depressed when many banks sell their assets at the same time. When banks are...
Persistent link: https://www.econbiz.de/10012481571
We study how heterogeneity in banks’ asset holdings affects fragility. In the model, banks face a risk of bank runs and have to liquidate long-term assets in a common market to repay runners. Liquidation prices are depressed when many banks sell their assets at the same time. When banks are...
Persistent link: https://www.econbiz.de/10013292145
We study how environmental, social and governance (ESG) investing reshapes information aggregation by prices. We develop a rational expectations equilibrium model in which traditional and green investors are informed about financial and ESG risks but have different preferences over them. Because...
Persistent link: https://www.econbiz.de/10013405418
We study how environmental, social and governance (ESG) investing reshapes information aggregation by prices. We develop a rational expectations equilibrium model in which traditional and green investors are informed about financial and ESG risks but have different preferences over them. Because...
Persistent link: https://www.econbiz.de/10013191008
We show that the correlation across financial institutions is a major force that increases their overall fragility. Our model features a financial system with financial institutions individually prone to runs and interconnected through fire sales. Strategic complementarities within and across...
Persistent link: https://www.econbiz.de/10013406863
Bank liabilities include debt with long-term maturities and deposits that typically are not withdrawn for extended periods. This subjects bank liabilities to debt dilution. Our analysis shows that this has major effects for how monetary policy shocks are transmitted to banks and for optimal...
Persistent link: https://www.econbiz.de/10013231301
This paper proposes a macro-banking model with corporate debt choice and investigates the impacts of bank capital regulation. Compared to non-banks, banks provide restructurable debt that resolves firm liquidations. Capital regulation corrects deposit insurance distortions but reduces bank debt...
Persistent link: https://www.econbiz.de/10013309744
I investigate the impact of bank capital requirements in a business cycle model with corporate debt choice. Compared to non-bank investors, banks provide restructurable loans that reduce firm bankruptcy losses and enhance production efficiency. Raising capital requirements eliminates deposit...
Persistent link: https://www.econbiz.de/10012935106
Financial covenants influence firm behavior by state-contingently allocating decision rights. I develop a quantitative model with long-term debt where shareholders cannot commit to not dilute existing lenders with new debt issuances and risky investments. Lenders intervene upon covenant...
Persistent link: https://www.econbiz.de/10012851043