Research
Published Papers
Bank Risk-Taking and Impaired Monetary Policy Transmission, accepted at International Journal of Central Banking (with E. Schliephake)
Bank Borrowing, Fragility and Real Interest Rates, accepted at Journal of Money, Credit and Banking (with T. Ahnert and K. Anand)
Leaping into the Dark: A Model of Policy Gambles, accepted at Journal of Comparative Economics (with K. Anand and P. Gai)
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)
Working Papers / Work in Progress
The Leverage Effect of Bank Disclosures (with C. Laux and D. Pothier)
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.
Optimal Timing of Policy Interventions in Troubled Banks (with P. Mayer and D. Pothier)
We analyze the problem of a policy authority (PA) that must decide when to liquidate a troubled bank whose solvency is uncertain. Delaying liquidation increases the chance that information arrives that reveals the bank’s solvency state. However, delaying liquidation also gives uninsured creditors the opportunity to withdraw, which raises the cost of bailing out insured depositors. The optimal intervention date trades off these costs with the option value of making a more efficient liquidation decision following the arrival of information. Providing the bank with liquidity support buys the PA time to wait for information, but increases the PA’s losses if the bank is insolvent. The PA may therefore optimally choose to delay the provision of liquidity support in order to minimize its losses.
available as Bundesbank Discussion Paper and on SSRN
A summary of the paper can be found as SUERF Policy Brief.
Funding Risk and Collateralized Lending (with T. Daniels)
draft coming soon