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Monetary Easing, Leveraged Payouts and Lack of Investment

Acharya, Viral V. - 2019

, potentially spurring productive investment. Low interest rates, however, also induce entrepreneurs to lever up so as to increase … their incentives thereby lowering productivity and discouraging investment. If leverage is unregulated (for example, due to … payouts by stimulating investment in response to adverse shocks only up to a level below the first-best. The optimal monetary …

Persistent link: https://www.econbiz.de/10012480414

Financial Vulnerability and Risks to Growth in Emerging Markets

Acharya, Viral V. - 2020

This paper introduces a new financial vulnerability index for emerging market economies by exploiting key differences in their business cycles relative to those of advanced economies. Information on the domestic price of risk, cost of dollar hedging and market-based measures of bank...

Persistent link: https://www.econbiz.de/10012481606

Leverage, Moral Hazard and Liquidity

Acharya, Viral V. - 2010

We build a model of the financial sector to explain why adverse asset shocks in good economic times lead to a sudden drying up of liquidity. Financial firms raise short-term debt in order to finance asset purchases. When asset fundamentals worsen, debt induces firms to risk-shift; this limits...

Persistent link: https://www.econbiz.de/10012462815

Securitization without risk transfer

Acharya, Viral V. - 2010

We analyze asset-backed commercial paper conduits which played a central role in the early phase of the financial crisis of 2007-09. We document that commercial banks set up conduits to securitize assets while insuring the newly securitized assets using credit guarantees. The credit guarantees...

Persistent link: https://www.econbiz.de/10012462921

Rollover Risk and Market Freezes

Acharya, Viral V. - 2010

The crisis of 2007-09 has been characterized by a sudden freeze in the market for short-term, secured borrowing. We present a model that can explain a sudden collapse in the amount that can be borrowed against finitely-lived assets with little credit risk. The borrowing in this model takes the...

Persistent link: https://www.econbiz.de/10012462978

A Transparency Standard for Derivatives

Acharya, Viral V. - 2011

Derivatives exposures across large financial institutions often contribute to - if not necessarily create - systemic risk. Current reporting standards for derivatives exposures are nevertheless inadequate for assessing these systemic risk contributions. In this paper, I explain how a...

Persistent link: https://www.econbiz.de/10012461100

Counterparty Risk Externality : Centralized Versus Over-the-counter Markets

Acharya, Viral V. - 2011

We model the opacity of over-the-counter (OTC) markets in a setup where agents share risks, but have incentives to default and their financial positions are not mutually observable. We show that this setup results in excess "leverage" in that parties take on short OTC positions that lead to...

Persistent link: https://www.econbiz.de/10012461658

Fiscal Stimulus, Deposit Competition, and the Rise of Shadow Banking : Evidence from China

Acharya, Viral V.; Qian, Jun; Su, Yang; Zhishu Yang - National Bureau of Economic Research - 2024

The rise of shadow banking and attendant financial fragility in China can be traced to intensified deposit competition following the global financial crisis (GFC). Deposit competition intensified after the GFC because the GFC slowed down banks' deposit growth from cross-border money inflows and...

Persistent link: https://www.econbiz.de/10014468234