We investigate the impact of short-term weather and long-term climate on self-reported life satisfaction using panel data. We find robust evidence that day-to-day weather variation impacts life satisfaction by a similar magnitude to acquiring a mild disability. Utilizing two sources of variation...

Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system.  We propose precise definitions of these concepts and analyze their magnitude.  Contagion occurs when a shock to the assets of a single firm causes other...

In this paper, we analyse a novel panel data set to compare the relevance of alternative measures of capitalisation for bank failure during the 2007-10 crisis, and to search for evidence of manipulated Basel risk-weights.  Compared with the unweighted leverage ratio, we find the risk-weighted...

In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector.  Numerical simulations are performed using stylized Chinese data, and banks failures are generated through...

In many countries, house prices are subject to boom/bust cycles and in some these are linked to severe economic and financial instability.  Overheating can have both a price and a quantity dimension, but it is likely that they are linked by common drivers.  However, much depends on the...

 We propose a new class of multivariate volatility models utilizing realized measures of asset volatility and covolatility extracted from high-frequency data. Dimension reduction for estimation of large covariance matrices is achieved by imposing a factor structure with time-varying conditional...

Consumer leverage can generate financial crises characterized by increased bankruptcy, tightened credit access and reduced demand for goods.  This paper embeds financial frictions in the mortgage contracts of homeowners within a two-sector economy to show that even at moderate initial levels,...

Banks create excessive systemic risk through leverage and maturity mismatch, as financial constraints introduce welfare-reducing pecuniary externalities.  Macroprudential regulators can achieve efficiency with simple linear constraints on banks' balance sheets, which require less information...

After the global financial crisis, there is greater awareness of the need to understand the interactions between the financial sector and the real economy and hence the potential for financial instability.  Data from the financial flow of funds, previously relatively neglected, are now seen as...

This study outlines a new theory linking industrial structure to optimal employment contracts and value reducing risk taking.  Firms hire their executives using optimal contracts derived within a competitive labour market.  To motivate effort firms must use some variable remuneration.  Such...