I am a Principal Economist in the Financial Research Division at the European Central Bank (my CV) and a Research Fellow in the Financial Economics Programme of the CEPR.
This is my private site and the views expressed in the material on these pages are my own and do not reflect those of the European Central Bank (my official webpage).
Contact: florian *dot* heider *at* gmail *dot* com [PGP key]
(links are to final or near-final versions on SSRN, for published versions see journal sites)
Examines the impact of ECB liquidity provision on the trading of liquidity among banks since the Lehman Bankruptcy. More central bank liquidity reduces the demand for liquidity in the market but also increases the supply in stressed countries, especially during the height of the sovereign debt crisis.
Analyzes optimal hedging contracts between a protection buyer and protection sellers. Such contracts may turn into liabilities and undermine incentives of protection sellers not to take risks. Margins help to restore incentives. [Featured in Financial Times Alphaville (11.1.2012)]
We model the interaction between optimal margins and fire-sale prices (when assets are sold to satisfy margin calls). The supply of assets can be downward-sloping, which creates multiple welfare-ranked equilibria. The pecuniary externality present when selling assets means that margins are used too much relative to the constrained-efficient outcome.
Negative policy rates induce banks with more deposit funding to lend less overall, and direct lending to riskier firms, some of which did not receive loans before. We use banks' inability to pass on negative rates to depositors in diff-in-diff set-up at the time policy rates in Europe become negative. We control for the impact on firms' demand for credit by considering borrower firms located in different currency areas. A placebo at a time when policy rates fall but are positive shows no effect.
In a semi-strong efficient stock market, the stock price is a sufficient statistic for CEO effort with respect to other public information. But the stock price does not fully reflect the value consequences of CEO shirking. To deter such off-equilibrium behaviour, the CEO must receive a lot of stock-based pay. Our model can explain the prevalence of stock-based pay in hard-to-value firms despite market efficiency, efficient contracting and the absence of manipulation.
Examines stress in the European interbank market using data derived from payments transactions. A triple-difference approach around the peak of the sovereign debt crisis shows that the increased counterparty risk of borrower banks in the periphery of the eurozone leads to less lending from banks in the core. Yet, the loss of cross-border lending is covered by an increase in domestic lending.
Banks need to hold liquidity (reserves) for prudential reasons. Holding liquid assets gives banks the right incentives to invest in risk management. Once banks operate under deposit insurance (which we derive from first principles) or trade on the interbank market (to insure against idiosyncratic liquidity risk), holding liquid assets must be regulated. Our theory of liquidity requirements avoids "Goodhart's paradox" and bears little resemblance to current Basel-type liquidity regulation.