Optimal Timing of Policy Intervention in Troubled Banks, forthcoming, Journal of Financial Intermediation (with P. Mayer and D. Pothier)
Also available as: Bundesbank Discussion Paper and on SSRN
A summary of the paper can be found as SUERF Policy Brief.
Bank Risk-Taking and Impaired Monetary Policy Transmission, International Journal of Central Banking , 20(3), July 2024, 257-303 (with E. Schliephake)
Also available as ECB Discussion Paper and Bundesbank Discussion Paper.
Bank Borrowing, Fragility and Real Interest Rates, Journal of Money, Credit and Banking, 56(6), September 2024, (with T. Ahnert and K. Anand)
Also available as CEPR Discussion Paper, ECB Discussion Paper and Bundesbank Discussion Paper .
Leaping into the Dark: A Model of Policy Gambles, Journal of Comparative Economics, 51(2), June 2023, 457-476 (with K. Anand and P. Gai)
Also available as Bundesbank Discussion Paper.
Safe but Fragile: Information Acquisition, Liquidity Support and Redemption Runs; Journal of Financial Intermediation, 52, October 2022 (with D. Pothier)
Decoupling Real and Nominal Rigidities: A Re-examination of the Canoncial Model of Price Setting under Menu Costs; Economic Letters, 156, 2017, 129-132 (with A. Meyer-Gohde)
Too Much of a Good Thing? A Theory of Short-term Debt as a Sorting Device; Journal of Financial Intermediation, 26, April 2016, 100-114 (with D. Pothier)
Credit provision and banking stability after the GFC: The role of bank regulation and the quality of governance; Journal of International Money and Finance, 66, September 2016, 113-135 (with M. Fratzscher and C. Lambert)
Liquidity Requirements - A Double-Edged Sword; International Journal of Central Banking, 11(4), December 2015, 129 –168
Guarantees, transparency and the interdependency between sovereign and bank default risk; Journal of Banking and Finance, 45 (2014), 321–337 (with K. Anand and F. Heinemann)
Target 2 and the European Sovereign Debt Crisis; Kredit und Kapital, 45 (2), 2012, 135 – 174 (with U. Bindseil)
The Leverage Effect of Bank Disclosures (with C. Laux and D. Pothier)
R&R
The general view underlying bank regulation is that bank disclosures provide market discipline and reduce banks’ risk-taking incentives. We show that bank disclosures can increase bank leverage and bank risk. The reason stems from the interaction between insured and uninsured debt. Bank disclosures reduce the agency problem between uninsured debt and equity, thereby lowering the cost of leverage for banks. By issuing uninsured short-term debt that is repaid ahead of insured deposits when economic conditions deteriorate, banks dilute insured deposits. Higher levels of uninsured short-term debt increase the subsidy provided by deposit insurance, which increases banks’ risk-taking incentives. We identify conditions under which this negative leverage effect dominates the standard market discipline effect, so that providing market discipline through bank disclosures increases banks’ risk.
available on SSRN and as Bundesbank Discussion Paper
A summary of the paper is available on the Columbia Law School's Blue Sky Blog and as SUERF Policy Brief.