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The Dynamics of Financially Constrained Arbitrage

Gromb, Denis; Vayanos, Dimitri - C.E.P.R. Discussion Papers - 2015

We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral...

Persistent link: https://www.econbiz.de/10011184076

Inequality, Leverage and Crises

Kumhof, Michael; Rancière, Romain - C.E.P.R. Discussion Papers - 2011

The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2007 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial...

Persistent link: https://www.econbiz.de/10008784720

A New Index of Currency Mismatch and Systemic Risk

Rancière, Romain; Tornell, Aaron; Vamvakidis, Athanasios - C.E.P.R. Discussion Papers - 2011

This paper constructs a new measure of currency mismatch in the banking sector that controls for bank lending to unhedged borrowers. This measure explicitly takes into account the indirect exchange rate risk that banks undertake when they lend to borrowers that will not be able to repay in the...

Persistent link: https://www.econbiz.de/10008854496

The Great Mortgaging: Housing Finance, Crises, and Business Cycles

Jordà, Òscar; Schularick, Moritz; Taylor, Alan M. - C.E.P.R. Discussion Papers - 2014

course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have …

Persistent link: https://www.econbiz.de/10011083232

Never Say Never: Commentary on a Policymaker’s Reflections

Obstfeld, Maurice - C.E.P.R. Discussion Papers - 2014

Stanley Fischer is a rarity among economic policymakers. He came to the policy world as an internationally recognized intellectual leader on macroeconomic theory and policy. He confronted numerous emerging market crises, including the globally systemic Asian crisis, as the IMF’s First Deputy...

Persistent link: https://www.econbiz.de/10011083383

Fire-sale FDI

Acharya, Viral V; Shin, Hyun Song; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2007

Capital flight associated with the onset of a financial crisis in a country is often accompanied by an inflow of capital associated with foreign direct investment (FDI). Our paper provides a theoretical framework for this puzzle, and draws wider conclusions on the welfare effects of foreign...

Persistent link: https://www.econbiz.de/10005788913

Why Do Emerging Economies Borrow Short Term?

Broner, Fernando A; Lorenzoni, Guido; Schmukler, Sergio - C.E.P.R. Discussion Papers - 2007

-term debt. First, we present a model where the debt maturity structure is the outcome of a risk sharing problem between the … government and bondholders. By issuing long-term debt, the government lowers the probability of a rollover crisis, transferring … government faces a trade-off between safer long-term debt and cheaper short-term debt. Second, we construct a new database of …

Persistent link: https://www.econbiz.de/10005789190

Crises and Punishment: Moral Hazard and the Pre-1914 International Financial Architecture

Flandreau, Marc - C.E.P.R. Discussion Papers - 2003

This Paper argues that the backbone of the pre-1914 international financial architecture was the concern about moral hazard. No decentralized system can leave without safeguards against free riding and this typically means that problem countries must find by themselves the means to fix their...

Persistent link: https://www.econbiz.de/10005791208

Supply Shocks and Currency Crises: The Policy Dilemma Reconsidered

García-Fronti, Javier; Miller, Marcus; Zhang, Lei - C.E.P.R. Discussion Papers - 2006

The stylised facts of currency crises in emerging markets include output contraction coming hard on the heels of devaluation, with a prominent role for the adverse balance-sheet effects of liability dollarisation. In the light of the South East Asian experience, we propose an eclectic blend of...

Persistent link: https://www.econbiz.de/10005123989

Liquidity Risk and Correlation Risk: A Clinical Study of the General Motors and Ford Downgrade of May 2005

Acharya, Viral V; Schaefer, Stephen M; Zhang, Yili - C.E.P.R. Discussion Papers - 2007

The GM and Ford downgrade to junk status during May 2005 caused a wide-spread sell-off in their corporate bonds. Using a novel dataset, we document that this sell-off appears to have generated significant liquidity risk for market-makers, as evidenced in the significant imbalance in their quotes...

Persistent link: https://www.econbiz.de/10005123999