Policymakers often express concern that herding by financial market participants destabilizes markets and increases the fragility of the financial system. This paper provides an overview of the recent theoretical and empirical research on herd behavior in financial markets. It addresses the...

An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns. We show analytically and quantitatively that the macroprudential policy should optimally respond...

This paper assesses the role of bank and nonbank financial institutions' balance sheet foreign exposures and risk management practices in driving capital flow responses to global risk. Using a unique and previously unexplored dataset on domestic and cross border balance sheet positions of...

The analysis of interconnectedness and contagion is an important part of the financial stability and risk assessment of a country's financial system. This paper offers detailed and practical guidance on how to conduct a comprehensive analysis of interconnectedness and contagion for a country's...

The choice of infrastructure delivery through public versus private provision is driven by investment and operational efficiency, and cost of capital differentials. While the first two factors are measurable --- albeit with mixed results --- the appropriate discount rate instigates...

The political economy literature has put forward a multitude of hypotheses regarding the drivers of structural reforms, but few, if any, empirically robust findings have emerged thus far. To make progress, we draw a parallel with model uncertainty in the growth literature and provide a new...

We examine the extent to which regulations of entry and credit access are related to competition using data on 28 manufacturing sectors across 64 countries. A robust finding is that bureaucratic and costly entry regulations tend to hamper competition, as proxied by the price-cost margin, in the...

This paper analyzes the effects of selected structural reforms on output and employment in the short and medium term. It uses a comprehensive cross-country firm-level dataset covering both advanced and emerging market economies over the period 2003-2014. In line with previous studies, it finds...

This paper describes a new database of major labor and product market reforms covering 26advanced economies over the period 1970-2013. The focus is on large changes in product marketregulation in seven individual network industries, employment protection legislation for regularand temporary...

Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on enviromental outcomes and green growth indicators in a...