Bank reserves in the United States increased dramatically at the end of 2008. Subsequent asset purchase programs in 2009 and 2011 more than doubled the quantity of reserves outstanding. These events required major adjustments in banks' balance sheets. We study the evolution of reserve holdings...

Loan guarantees are arguably the most widely used policy intervention in credit markets, especially for consumers. This may be natural, as they have several features that, a priori, suggest that they might be particularly effective in improving allocations. However, despite this, little is...

This paper examines how the tightening of accounting constraints associated with the SunTrust bank decision in 1998 impacted the loan loss reserve policies of banks differently based on ownership structure. The SunTrust case, the result of an SEC inquiry over possible overstating of loan loss...

We find the optimal target values for fiscal rules and measure their aggregate effects using a model of sovereign default. We calibrate the model to an economy that pays a significant sovereign default premium when the government is not constrained by fiscal rules. For different levels of the...

Price triggers in contingent capital bonds are analyzed. Pervasiveness of multipleequilibria and nonexistence of equilibrium in theoretical models is illustrated. Evidence of these problems from market experiments is summarized. Possible solutions are evaluated.

It is often the case that banks in the US are willing to borrow in the fed funds market (the interbank market for funds) at higher rates than the ones they could obtain by borrowing at the Fed's discount window. This phenomenon is commonly explained as the consequence of the existence of a...

We measure the effects of debt dilution on sovereign default risk and show how these effects can be mitigated with debt contracts promising borrowing-contingent payments. First, we calibrate a baseline model à la Eaton and Gersovitz (1981) to match features of the data. In this model, bonds'...

This paper provides a new theory for two-sided payment card markets. Adopting payment cards requires consumers and merchants to pay a fixed cost, but yields a lower marginal cost of making payments. Analyzing adoption and usage externalities among heterogeneous consumers and merchants, our...

This paper investigates a puzzle and possible policy concern: Why do platforms such as eBay and Visa that enable the trade of goods of different unobserved costs and values rely predominantly on linear ad-valorem fees, that is, fees that increase in proportion to the sale price of the trades...

This paper studies unintended consequences of price cap regulation in the presence of demand externalities in the context of payment cards. The recent U.S. debit card regulation was intended to lower merchant card acceptance costs by capping the maximum interchange fee. However, small-ticket...