In fighting a financial crisis, opacity (keeping the names of banks borrowing at emergency lending facilities secret) and stigma (the cost of having a bank's name revealed) are desirable to restore confidence. Lending facilities raise the perceived average quality of all banks' assets. Opacity...

Safe assets are demanded to smooth consumption across states (both intertemporally and in cross-section). Some of these assets are supplied publicly (government bonds) and some are created and supplied privately (such as mortgagebacked securities and asset-backed securities). Private assets are...

Short-term collateralized debt, such as demand deposits and money market instruments - private money, is efficient if agents are willing to lend without producing costly information about the collateral backing the debt. When the economy relies on such informationally-insensitive debt, firms...

A financial crisis is an event of sudden information acquisition about the collateral backing short-term debt in credit markets. When investors see a financial crisis coming, however, they react by more intensively acquiring information about firms in stock markets, revealing those that are...

How does investors' information about a country's fundamentals, and the fact that this information may be asymmetrically held, affect a country's financing cost? Motivated by this question, and by the observation that sovereign bonds are usually auctioned in large lots to a large number of...

Economic variables are known to move asymmetrically over the business cycle: quickly and sharply during crises, but slowly and gradually during recoveries. Not known is the fact that this asymmetry is stronger in countries with less-developed financial systems. This new fact is documented using...

We study a market with free entry and exit of firms who can produce high-quality output by making a costly but efficient initial unobservable investment. If no learning about this investment occurs, an extreme "lemons problem" develops, no firm invests, and the market shuts down. Learning...

Commercial banks are subject to regulation that restricts their investments. When banks are concerned for their reputation, however, they could self-regulate and invest more efficiently. Hence, a shadow banking that arises to avoid regulation has the potential to improve welfare. Still,...

Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate endogenous crises when the government cannot commit. However, at the outbreak of financial problems, usually the government is uncertain about their nature, and hence it may delay...

We show that political booms, measured by the rise in governments' popularity, predict financial crises above and beyond other better-known early warning indicators, such as credit booms. This predictive power, however, only holds in emerging economies. We show that governments in emerging...