We develop a dynamic model to assess the effects of liquidity and leverage requirements on banks' insolvency risk. The model features endogenous capital structure, liquid asset holdings, payout, and default decisions. In the model, banks face taxation, flotation costs of securities, and default...

The paper analyzes a very stylized model of crises and demonstrates how the degree of strategic complementarity in the actions of investors is an important determinant of fragility. It is shown how the balance sheet composition of a financial intermediary, parameters of the information structure...

In this paper we use the notion of a housing bubble as an equilibrium in which some investors hold houses only for resale purposes and not for the expectation of a dividend, either in the form of rents or utility. We provide a life-cycle model where households face collateral constraints that...

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks....

This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we...

Crowding-out during the British Industrial Revolution has long been one of the leading explanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the...

This paper develops a theoretical model in which firms may choose multiple banking relationships to reduce the risk that financing will be denied by ‘relationship banks’ should the latter experience liquidity problems and refuse to roll over lines of credit. The inability to refinance from...

Two aspects of systemic risk, the risk that banks fail together, are modeled and their interaction examined. First, the ex-post aspect, in which the failure of a bank brings down a surviving bank as well, and second, the ex-ante aspect, in which banks endogenously hold correlated portfolios...

In the recent theoretical literature on lending risk, the common pool problem in multi-bank relationships has been analysed extensively. In this Paper we address this topic empirically, relying on a unique panel dataset that includes detailed credit-fie information on distressed lending...

The paper seeks to explain the huge cross country variation in private pension funding, shaped by historical choice made when universal pension systems were created after the Great Depression. According to Perotti and von Thadden (2006), large inflationary shocks due to war damage devastated...