The Dynamics of Financially Constrained Arbitrage
We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices...
Global Capital Markets, Housing Prices, and Partisan Fiscal Policies
In recent years, global imbalances have channeled the excess savings of surplus countries toward the real estate markets of deficit countries. By...
Brave New World? Macro Prudential Policy and the new Political Economy of The Federal Reserve
The Financial Crisis that started in 2007 ushered in new responsibilities for central banks, particularly for what is termed “macro-prudential policy...
Great Expectations, Veto Players, and the Changing Politics of Banking Crises
How have the politics of banking crises changed over the long run? Unlike existing static accounts, we offer a dynamic theory emphasizing how the...
The Federal Reserve as Global Lender of Last Resort, 2007-2010
Passage of the Dodd-Frank financial reform bill, in conjunction with a Supreme Court ruling supporting a Freedom of Information Act request, required...
Credit Risk Spillovers, Systemic Importance and Vulnerability in Financial Networks
How does the change in the creditworthiness of a financial institution or sovereign impact its creditors’ solvency? I address this question in the...
International Correlation Risk
We document that cross-sectional FX correlation disparity is countercyclical, as exchange rate pairs with high average correlation become more...
Information Asymmetries, Volatility, Liquidity, and the Tobin Tax
We develop a tractable model in which trade is generated by asymmetry in agents' information sets. We show that, even if news are not generated by a...
Capital Structure, Investment, and Fire Sales
We study a dynamic general equilibrium model in which firms choose their investment level and their capital structure, trading off the tax advantages...
The Optimal Consumption Function in a Brownian Model of Accumulation Part B: Existence of Solutions of Boundary Value Problems
In Part A of the present study, subtitled 'The Consumption Function as Solution of a Boundary Value Problem' Discussion Paper No. TE/96/297, STICERD...
Destabilizing carry trades
We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supplying excessive...
Network Risk and key Players: A Structural Analysis of Interbank Liquidity
We model banks’ liquidity holding decision as a simultaneous game on an interbank borrowing network. We show that at the Nash equilibrium, the...
Networked Default: Public Debt, Trade Embeddedness, and Partisan Survival in Democracies since 1870
Sovereign default is often associated with the downfall of incumbent governments in democratic polities. Existing scholarship directs attention to the...
Some historical perspectives on the Bond-Stock Earnings Yield Model for crash prediction around the world
We provide a historical perspective focusing on Ziemba's experiences and research on the bond-stock earnings yield differential model (BSEYD) starting...
Land and Stock Bubbles, Crashes and Exit Strategies in Japan Circa 1990 and in 2013
We study the land and stock markets in Japan circa 1990 and in 2013. While the Nikkei stock average in the late 1980s and its -48% crash in 1990 is...
Does the Bond-Stock Earning Yield Differential Model Predict Equity Market Corrections Better Than High P/E Models?
In this paper, we extend the literature on crash prediction models in three main respects. First, we relate explicitly crash prediction measures and...
