The augmented bank balance-sheet channel of monetary policy, with Christian Bittner, Diana Bonfim, Farzad Saidi, Glenn Schepens, and Carla Soares - submitted
Combines credit register data from Portugal and Germany together with a simple model (with an external financing constraint, risk-taking, and a zero lower bound on deposit rates) to examine the transmission of monetary policy on bank credit supply in a high-rate and a low-rate environment simultaneously.
Leverage and Risk-Taking in a Dynamic Model, with Tobias Berg - submitted
Identifies a new motive for firms to avert risk, even if this is inefficient, in an N-period dynamic model where in each period there is an identical asset-substitution problem. By averting risk, firms with medium leverage can preserve the option to issue safe and hence, cheap debt in the future.
How do banks manage liquidity? Evidence from the ECB's tiering experiment, with Luca Baldo, Peter Hoffmann, Jean-David Sigaux, and Olivier Vergote - submitted
The reaction of banks to the ECB's introduction of a tiered remuneration of reserves shows a preference for stable liquidity positions across different liquid assets.
A corporate finance perspective on environmental policy, with Roman Inderst
Introduces financing constraints and industry equilibrium in a model with emission externalities. The second-best occurs when the Pigou tax is set below the marginal social cost and tax receipts are paid back to firms. This is akin to a cap-and-trade system where the cap is generous and pollution rights are offered at a discount.
A theory of bank liquidity requirements, with Charles Calomiris and Marie Hoerova.
Holding liquid assets gives banks the incentive 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.
The euro area money market network during the financial crisis: a look at cross-border fragmentation, with Carlos Garcia-de-Andoain and Gerhard Rünstler (available upon request)
Use network techniques and payment data to show that the euro area money market fragmented along national communities in the financial crisis.
Stressed interbank markets: Evidence from the European financial and sovereign debt crisis, with Juan Carlos Frutos, Carlos Garcia-de-Andoain, and Patrick Papsdorf
Examines stress in the European interbank market using data derived from payment transactions. The increase in the risk of borrower banks in the periphery of the eurozone leads to less lending from banks in the core. An increase in domestic lending substitutes for the loss in cross-border lending.