Debt and Deficits: Fiscal Analysis with Stationary Ratios
We introduce a measure of a government’s fiscal position that exploits cointegrating relationships among fiscal variables. The measure is a loglinear...
The paradox of perfect supervision
Each financial crisis brings more financial supervision, more models and larger buffers – but still fragility persists. The paradox of perfect...
How financial authorities best respond to AI challenges
Artificial intelligence is transforming finance faster than the authorities can adapt. This column argues that while AI enhances the financial system...
Research highlight
A Preferred-Habitat Model of Term Premia, Exchange Rates, and Monetary Policy Spillovers
American Economic Review, 115(11), 3788–3824
Behind the Corporate Veil: How Business Groups Arbitrage ESG Disclosure Mandates
We examine how ESG disclosure mandates introduced in the headquarters countries of business groups affect the ESG performance of both parent companies...
Of AI bubbles and crashes
Warnings of an AI stock market bubble abound. Should investors and policymakers be concerned? This column argues that innovation-driven bubbles can...
Talk and the City: How Far to Trust Bankers (Not) Calling for Bailouts?
To evaluate a bank’s resilience to financial stress, authorities often rely on private information from a peer institution, or counterparty. This...
Research highlight
Passive Investing and the Rise of Mega-Firms
The Review of Financial Studies, hhaf085
The Tragedy of Complexity
Complexity can create value. At the same time, understanding more complex goods requires more of an agent’s attention. We show that equilibrium...
Forecasting Crashes with a Smile
We derive option-implied bounds on the probability of a crash in an individual stock, and argue a priori that the lower bound should be close to the...
Artificial intelligence and financial crises
The rapid adoption of artificial intelligence (AI) poses new and poorly understood threats to financial stability. We use a game-theoretic model to...
Shadow Banks on the Rise: Evidence Across Market Segments
This paper uses credit bureau data on 648 million retail loans in India to examine the comparative advantages of shadow banks across market segments...
The Structure of Leveraged Buyouts and the Free-Rider Problem
We study the structure of public firm buyouts in a model that features both the Berle-Means problem (lack of incentives) and the Grossman-Hart problem...
