In this Preface, we offer some analysis of the 2008-2009 financial crisis and its implications for financial industry reform and research. We primarily focus on issues relating to transparency and the measurement of risk and how these are affected by management incentives that are often...

Motivated by the tension first revealed during the global financial crisis between thedomestic and international financial stability obligations of central bank reserve managers,this paper offers some reflections along four main lines. First, the paper highlights howofficial reserve management...

In times of financial distress, central banks provide unlimited liquidity to avoid fire sales. In response, banks raise their demand for collateral assets, and the short-term scarcity of collateral securities leads to higher prices, the Fire Buy premium. To avoid collateral scarcity, central...

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

With 30% of the world's investment grade sovereign bonds trading at sub-zero yields, there is a growing acceptance that negative interest rates are the 'new normal.' Even very low probabilities of sustained negative interest rates in the future leads to incredibly high Expected Values for...

Should monetary policymakers raise interest rates during a boom to rein in financial excesses? We theoretically investigate this question using an aggregate demand model with asset price booms and financial speculation. In our model, monetary policy affects financial stability through its impact...

In this paper we: (i) provide a model of endogenous risk intolerance and serve aggregate demand contractions following a large (non-financial) shock; and (ii) demonstrate the effectiveness of Large Scale Asset Purchases (LSAPs) in addressing these contractions. The key mechanism stems from...

Higher than average Price-to-Earnings (P/E) ratios and Cyclically-Adjusted Price-to-Earnings (CAPE) ratios have been tolerated by investors recently on the basis of low interest and inflation rates. This white paper debates how much premium should be acceptable using an inverse percentile-based...

In responding to the severity and broad scope of the crisis, the Federal Reserve (the Fed) has aggressively utilized both traditional monetary policy instruments, as well as innovative tools to provide liquidity. In this paper, the Fed's actions are examined in light of the evolution of risk...