This paper examines the effects of the recent financial crisis on corporate cash holdings and saving propensities. We find that on average, firms reduce their cash holdings in the first year of the crisis when the supply of external finance is tightened, and increase their holdings in cash from...

Anticipating a bailout in the event of a crisis distorts a bank's incentives in multiple dimensions. Bailout payments can, for example, lead banks to issue too much short-term debt while simultaneously underinvesting in liquid assets. To correct these distortions, policymakers may choose to...

Do policies that aim to mitigate fire sale externalities actually improve financial stability? We study this question in a model of financial intermediation where banks may sell long-term assets in financial markets subject to cash-in-the-market pricing and bank runs. In the absence of...