We review the major provisions of Dodd-Frank, focusing on the monitoring of systemic risk, the limitation on proprietary trading, the regulation of the hedge fund industry, credit rating agencies, and the rules applicable to derivative trading. We compare these provisions with the recent...

This paper presents a stochastic dynamic model that can be used to describe situations in asset management where hedge funds may inadvertently find themselves running a Ponzi financing scheme. Greater transparency is necessary to reduce such opportunities, such as audited financials, and...

The causes of the present crisis are largely to be found in the unregulated development of new financial products and in the over-expansion of the financial sector, in particular the shadow banking sector, which emerged precisely to avoid regulation. These changes led to lower risk perception,...

We investigate consequences of overleveraging and financial-sector stress on real economic activities. When banks become vulnerable, due to high leveraging, and there is a strong feedback between the real and the financial sector, a regime of high financial stress may arise. The vulnerability of...

This paper studies the issue of local instability of the banking sector and how it may spillover to the macroeconomy. The banking sector is considered here as representing a wealth fund that accumulates capital assets, can heavily borrow and pays bonuses. We presume that the banking system faces...

This paper introduces a Banking-Macro Model and estimates the linkages through a Multi-Regime VAR (MRVAR). We first introduce a dynamic model which is akin to the Brunnermeier and Sannikov (BS) model (2010). The banking sector borrows from capital markets, issues liabilities, accumulates assets,...

We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which—similar to Brunnermeier and Sannikov (2010)—adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To...

In this paper we construct a model of stock market, interest rate and output interaction which is a generalization of the well known 1981 model of Blanchard. We allow for imperfect substitutability between stocks and bonds in the asset market and for lagged portfolio adjustment. The reaction of...

In this paper we construct a model of stock market, interest rate and output interaction which is a generalization of the well known 1981 model of Blanchard. We allow for imperfect substitutability between stocks and bonds in the asset market and for lagged portfolio adjustment. The reaction of...

After the financial market meltdown of the years 2007–2008 the Obama administration responded with large fiscal stimulus package, yet the reaction to this stimulus has been diverse. Some predicted a multiplier effect in the order of 1.5, others argued that the multiplier will be less than 0.5....