In moral hazard models, bank shareholders have incentives to transfer wealth from the deposit insurer - that is, maximize put option value - by pursuing riskier strategies. For safe banks with large charter value, however, the risk-taking incentive is outweighed by the possibility of losing...

We use daily data on bank reserves and overnight interest rates to document a striking pattern in the high-frequency behavior of the U.S. market for federal funds: depository institutions tend to hold more reserves during the last few days of each "reserve maintenance period", when the...

We investigate how bank migration across state lines over the last quarter century has affected the size and covariance of business fluctuations within states. Starting with a two-state version of the unit banking model in Holmstrom and Triocole (1997), we conclude that the theoretical effect of...

Borders have a sizable negative impact on trade flows. Given the vast number of individual goods potentially traded, this "border effect" could have two possible explanations: (1) less international than domestic trade in the goods that are actually traded between countries ("flow"), or (2)...