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Credit, Financial Stability, and the Macroeconomy

Taylor, Alan M. - C.E.P.R. Discussion Papers - 2015

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

Persistent link: https://www.econbiz.de/10011213304

Moral and Social Constraints to Strategic Default on Mortgages

Guiso, Luigi; Sapienza, Paola; Zingales, Luigi - C.E.P.R. Discussion Papers - 2009

We use survey data to study American households’ propensity to default when the value of their mortgage exceeds the … value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing … the house. Yet, 17% of households would default, even if they can afford to pay their mortgage, when the equity shortfall …

Persistent link: https://www.econbiz.de/10005039578

The ECB as Lender of Last Resort for Sovereigns in the Euro Area

Buiter, Willem H.; Rahbari, Ebrahim - C.E.P.R. Discussion Papers - 2012

The paper establishes that sovereigns, like banks, need a lender of last resort (LoLR). In the euro area the ECB, with its estimated €3.4 trillion non-inflationary loss absorption capacity, is the only credible sovereign LoLR. The ECB/Eurosystem has been acting as sovereign LoLR through its...

Persistent link: https://www.econbiz.de/10011083551

Optimal capital requirements over the business and financial cycles

Malherbe, Frédéric - C.E.P.R. Discussion Papers - 2015

I propose a simple theory of intertwined business and financial cycles, where financial regulation both optimally responds to and influences the cycles. In this model, banks do not internalize the effect of their credit expansion on other banks’ expected bankruptcy costs, which leads to...

Persistent link: https://www.econbiz.de/10011165665

Testing Macroprudential Stress Tests: The Risk of Regulatory Risk Weights

Acharya, Viral V; Engle III, Robert F; Pierret, Diane - C.E.P.R. Discussion Papers - 2013

Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. We provide a test of these stress tests by comparing their risk assessments and outcomes to those from...

Persistent link: https://www.econbiz.de/10011083469

Testing Macroprudential Stress Tests: The Risk of Regulatory Risk Weights

Acharya, Viral V; Engle III, Robert F; Pierret, Diane - C.E.P.R. Discussion Papers - 2014

Persistent link: https://www.econbiz.de/10011083787

Securitization Without Risk Transfer

Acharya, Viral V; Schnabl, Philipp; Suarez, Gustavo - C.E.P.R. Discussion Papers - 2012

We analyze asset-backed commercial paper conduits, which experienced a shadow-banking "run" and played a central role in the early phase of the financial crisis of 2007-09. We document that commercial banks set up conduits to securitize assets worth $1.3 trillion while insuring the newly...

Persistent link: https://www.econbiz.de/10011084084

Bank Capital and Dividend Externalities

Acharya, Viral V; Le, Hanh; Shin, Hyun Song - C.E.P.R. Discussion Papers - 2014

In spite of mounting losses banks continued to pay dividends during the crisis. We present a model that addresses this behavior. By paying out dividends, a bank transfers value to its shareholders away from creditors, among whom are other banks. This way, one bank's dividend payout policy...

Persistent link: https://www.econbiz.de/10011084101

Information Management in Banking Crises

Shapiro, Joel; Skeie, David - C.E.P.R. Discussion Papers - 2013

A regulator resolving a bank faces two audiences: depositors, who may run if they believe the regulator will not provide capital, and banks, which may take excess risk if they believe the regulator will provide capital. When the regulator's cost of injecting capital is private information, it...

Persistent link: https://www.econbiz.de/10011084160

Contagion in financial networks: A threat index

Demange, Gabrielle - C.E.P.R. Discussion Papers - 2012

An intricate web of claims and obligations ties together the balance sheets of a wide variety of financial institutions. Under the occurrence of default, these interbank claims generate externalities across institutions and possibly disseminate defaults and bankruptcy. Building on a simple model...

Persistent link: https://www.econbiz.de/10011084240