Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This … paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of …, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era. …

By combining new data on bilateral asset holdings with data on securities regulation in an empirical gravity model, it … is found that bilateral differences in securities regulation lead to decreased portfolio holdings. Hence, regulatory … the exogenous component of asset holdings to be associated with larger differences in securities regulation. This might …

-backed securities than are implicit in the book values of these assets, especially following the onset of the U.S. mortgage crisis. This … impairment. We also find that bank share prices, especially for banks with large exposures to mortgage-backed securities, react …-backed securities are also found to provision less for bad loans. Finally, we find that banks, and especially distressed banks, use …

We propose a new theory of systemic risk based on Knightian uncertainty (or "ambiguity"). We show that, due to … pessimistic about other asset classes as well. This means that idiosyncratic risk can create contagion and snowball into systemic … risk. Furthermore, in a Diamond and Dybvig (1983) setting, we show that, surprisingly, uncertainty aversion causes …

-value stocks. This helps to explain the cross section of asset returns when risk is priced according to a version of the "Bad Beta …

This paper studies the role of credit in the business cycle, with a focus on private credit overhang. Based on a study …; and for both types of recession, more credit-intensive expansions tend to be followed by deeper recessions and slower … controls and their lags. Then we study how past credit accumulation impacts the behavior of not only output but also other key …

We show that financial sector bailouts and sovereign credit risk are intimately linked. A bailout benefits the economy … two-way feedback between financial and sovereign credit risk using data on the credit default swaps (CDS) of the Eurozone …, the latter being consistent with an effect of the quality of sovereign guarantees on bank credit risk. …

faced by market-makers and the correlation risk for other securities in which they make markets was likely causal. Overall … a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market … excess co-movement in the fixed-income securities of all industries, not just in those of auto firms. In particular, using …

lower income level and not because of the existence of market failures (moral hazard or credit constraints), bad monetary …