In the early 1990s, after decades of high inflation and financial repression, Argentina embarked on a course of macroeconomic and bank regulatory reform. Bank regulatory policy promoted privatization, financial liberalization, and free entry, limited safety net support, and established a novel...

Both investors and borrowers are concerned about liquidity. Investors desire liquidity because they are uncertain about when they will want to eliminate their holding of a financial asset. Borrowers are concerned about liquidity because they are uncertain about their ability to continue to...

We study time-consistent bank resolution mechanisms. When interventions are ex post efficient, a government cannot commit not to inject capital into the banking system. Contrary to common wisdom, we show that the government may still avoid moral hazard and implement the first best allocation by...

We modify the Diamond and Dybvig (1983) model so that, besides offering liquidity services to depositors, banks also raise equity funding, make loans that are risky, and can invest in safe, liquid assets. The bank and its borrowers are subject to limited liability. When profitable, banks monitor...

Countercyclical capital buffers (CCyBs) are an old idea recently resurrected. CCyBs compel banks at the core of financial systems to accumulate capital during expansions so that they are better able to sustain operations during downturns. To gauge the potential impact of modern CCyBs, we compare...

We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on equilibrium bank risk taking, commercial bank failure, interest rates on loans, and market structure. We propose a market structure where big banks with market power interact with small,...

Bank balance sheet lending is commonly viewed as the predominant form of lending. We document and study two margins of adjustment that are usually absent from this view using microdata in the $10 trillion U.S. residential mortgage market. We first document the limits of the shadow bank...

We characterize how U.S. global systemically important banks (GSIBs) supply short-term dollar liquidity in repo and foreign exchange swap markets in the post-Global Financial Crisis regulatory environment and serve as the "lenders-of-second-to-last-resort". Using daily supervisory bank balance...

A model is developed which rationalizes contracts that give depositors the right to obtain funds on demand even when depositors intend to use these funds for consumption in the future. This is explained by depositor overoptimism regarding their own ability to collect funds in a run. Capitalized...