CEPR Discussion Paper – Macroprudential policy with earnings-based borrowing constraints

Author(s): Thomas Drechsel and Seho Kim Date: October 2022 Abstract: A large literature has studied optimal regulatory policy in macroeconomic models with collateral constraints. A common conclusion is that agents `over-borrow’ and optimal policy reduces debt positions through taxes. The reason is that agents do not internalize the effects of their choices on asset prices.[…]

NBER Working Paper: Five Facts about the UIP Premium

Author(s): Ṣebnem Kalemli-Özcan and Liliana Varela Date: May 2022 Abstract: We document five novel facts about Uncovered Interest Parity (UIP) deviations vis-à-vis the U.S. dollar for 34 currencies, during 1996-2018. 1) The UIP premium co-moves with global risk perception (VIX) for all currencies, whereas only for emerging market currencies there is a negative comovement between[…]

SSRN Working Paper – Trade Uncertainty and U.S. Bank Lending

Author(s): Ricardo Correa , Julian di Giovanni, Linda S. Goldberg, and Camelia Minoiu Date: September 2022 Abstract: When trade uncertainty directly affects credit supply it can amplify other contractionary impulses from a deterioration in the international trade environment. Exploiting heterogeneity in banks’ ex-ante exposure to trade uncertainty and loan-level data for U.S. banks, we show[…]

CEPR Discussion Paper – Uncertainty Shocks, Capital Flows, and International Risk Spillovers

Author(s): Ozge Akinci, Sebnem Kalemli-Özcan, Albert Queralto Date: July 2022 Abstract: Foreign investors’ changing appetite for risk-taking have been shown to be a key determinant of the global financial cycle. Such fluctuations in risk sentiment also correlate with the dynamics of UIP premia, capital flows, and exchange rates. To understand how these risk sentiment changes transmit[…]

Bruegel Working Paper – Mapping banking centres globally since 1970

Author(s): Emmanuel Mourlon-Druol, Aliénor Cameron Date: July 2022 Abstract: Brexit and the rise of China as a leading international economic power have revived discussions about the geography of banking centres. This paper analyses the geographical evolution of banking centres since the 1970s, based on a database constructed from a ranking of the top banks in[…]

NBER Working Paper – Restoring Confidence in Troubled Financial Institutions After a Financial Crisis

Author(s): Charles W. Calomiris, Mark Carlson Date: July 2022 Abstract: After an unprecedented number of banks suspended operations during the Panic of 1893, the head regulator of banks chartered by the United States government allowed about 100 banks to reopen after certifying their solvency. We evaluate whether actions by bank owners to change management, contract[…]

ECB Working Paper: Stress tests and capital requirement disclosures: do they impact banks’ lending and risk-taking decisions?

Author(s): Paul Konietschke, Steven Ongena, Aurea Ponte Marques Date: July 2022 Abstract: How do banks respond to changes in capital requirements as a result of the stress tests? Does the disclosure of stress test results matter? To answer these questions, we study the impact of European stress tests on banks’ lending, their corresponding risk-taking, the[…]

SSRN Working Paper – Internationalizing Like China

Author(s): Christopher Clayton, Amanda Dos Santos, Matteo Maggiori and Jesse Schreger Date: July 2022 Abstract: We empirically characterize how China is internationalizing the Renminbi by selectively opening up its domestic bond market to foreign investors and propose a dynamic reputation model to explain this internationalization strategy. The Chinese government deliberately controlled the entry of foreign[…]