Historical narratives typically associate financial crises with credit expansions and asset price misalignments. The question is whether some combination of measures of credit and asset prices can be used to predict these events.
The author examines recent trends in sterilized intervention among emerging-market economies, to determine the size and extent of this policy in relation to earlier periods of heavy reserve accumulation. He then analyzes whether the domestic costs and risks of substantial and prolonged sterilization are beginning to manifest themselves.
In this paper we develop a quantitative model of entrepreneurial activity (risk-taking) and consumer bankruptcy choices and use the model to study the effects of bankruptcy regulations on entrepreneurial activity, bankruptcy rate and welfare.
The authors review the state of the debate on hedge funds and the potential threat that hedge funds pose to financial stability. The collapse of a hedge fund or a group of hedge funds might pose a systemic risk directly by damaging systematically important financial institutions, or indirectly by increasing market volatility and generating a […]
The ongoing review of the IMF, initiated in 2005 by Managing Director De Rato, presents an excellent opportunity to re-examine the role, functions and governance of the Fund.
We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs.
This paper analyzes endogenous fluctuations in total factor productivity (TFP) in a dynamic general equilibrium model with heterogeneous agents, and illustrates the interaction of credit market frictions, asset prices, the entry and exit of firms, and fluctuations in TFP in response to firm-level productivity and aggregate credit-market shocks. I also analyze the effect of bankruptcy and foreclosure laws on fluctuations in TFP through their effect on credit market frictions.
This study investigate how debt restructurings have evolved over the decades. Debtors and creditors have a long history of engaging an outsider – a “third party”, such as the IMF – to organise and facilitate debt restructurings.
Stress testing, at its most general level, is an investigation of the performance of an entity under abnormal operating conditions.
The authors show that debt and equity issuance are procyclical for most listed U.S. firms.