This paper describes how behavioral elements are relevant to financial supervision,regulation, and central banking. It focuses on (1) behavioral effects of norms (social, legal,and market); (2) behavior of others (internalization, identification, and compliance); and(3) psychological biases. It...

The paper uses finance and agency theory to establish two main propositions: First, that the conditionality attached to adjustment programs supported by the IMF is justified. Second, that ownership of programs by the borrowing country is crucial for their success. Hence, since both IMF...

The deferred recognition of COVID-induced losses at banks in many countries hasreignited the debate on regulatory forbearance. This paper presents a model where thepublic's own political pressure drives regulatory policy astray, because the public is poorlyinformed. Using probabilistic game...

Cyber-attacks on financial institutions and financial market infrastructures are becomingmore common and more sophisticated. Risk awareness has been increasing, firms activelymanage cyber risk and invest in cybersecurity, and to some extent transfer and pool theirrisks through cyber liability...

U.S. business investment has taken a serious toll during the global financial crisis and also in the recovery phase investment did not pick up as expected. What is surprising is that the alleged investment slowdown happened at a time of record corporate profits and retained earnings, highly...

The objective of this paper is to present an integrated tool suite for IFRS 9- and CECL-compatible estimation in top-down solvency stress tests. The tool suite serves as an illustration for institutions wishing to include accounting-based approaches for credit risk modeling in top-down stress tests

Brazil's public-sector wage bill is comparatively high. It grows inertially and competeswith other spending. Rightsizing the wage bill could stimulate administrative efficiencyand bring more equity into a system where public employees earn more than private incomparable professions. Most...

Does labor court uncertainty and judge subjectivity influence firms' performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French...

This paper develops a theoretical framework to study the impact of bonus caps on banks' risk taking. In the model, labor market price adjustments can offset the direct effects of bonus caps. The calibrated model suggests that bonus caps are only effective when bank executives' mobility is...

Using prefectural data, we study the potential impact on wage dynamics of the planned minimum wage increase policy in Japan. Our main result is that stepping up minimum wage growth from 2 to the planned 3 percent per year could raise wage growth by 0.5 percent annually. Given Japan's need for...