This paper examines the power of different contractual mechanisms to influence an originator's choice of costly effort to screen borrowers when the originator plans to securitise its loans. The analysis focuses on three potential mechanisms: the originator holds a "vertical slice", or share of...

This paper analyses two aspects of banking crises: the choices that banks make to passively roll over loans in default versus actively pursuing their claims; and choices by regulators to ‘punish’ passive and insolvent banks versus rescuing them. Banks may choose to roll over loans in order...

This paper studies the impact of bank mergers on firm-bank lending relationships using information from individual loan contracts in Belgium. We analyse the effects of bank mergers on the probability of borrowers maintaining their lending relationships and on their ability to continue tapping...

Many countries, including economies in transition, have suffered banking crises in recent years. This paper develops a general framework for analysing trade-offs between policies for cleaning banks' balance sheets of bad debt. The framework - a two-tier hierarchy consisting of regulators, banks,...

This paper focuses on bank rescue packages and on the behaviour of troubled banks in light of rescue offers. A puzzling feature of experience with banking crises is that in many cases policy authorities make offers of bank rescue, and banks are reluctant to accept these offers. We study...

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to uncertainty aversion, beliefs on future asset returns are endogenous, and bad news on one asset class induces investors to be more pessimistic about other asset classes as well. This...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

We analyze political selection in a closed list proportional system where parties have strong gate-keeping power, which they use as an instrument to pursue votes. Parties face a trade-off between selecting loyal candidates or experts, who are highly valued by the voters and thus increase the...

This paper synthesizes and extends the literature on the taxation of foreign source income in a framework that covers both greenfield and acquisition investment, and a general constraint linking investment at home and abroad for the multinational by introducing a cost of adjustment for the...

The success or failure of the fight against tax havens is the outcome of a coordination game between a tax haven and its potential investors. Key determinants are the costly international pressure and the haven country's revenue pool. The latter is determined endogenously by the decisions of...