This paper (i) proposes a simple multi-currency model of speculative foreign exchange (FX) trading, (ii) uses a natural experiment to identify the implied components of the optimal trading strategy, and (iii) proposes a new spectral inference method to strengthen the statistical evidence on the...

We test if issuers of asset- and mortgage-backed securities receive rating favors from agencies with which they maintain strong business relationships. Controlling for issuer fixed effects and a large set of credit risk determinants, we show that agencies publish better ratings for those issuers...

We develop a dynamic model of dealer intermediation between a monopolistic customerdealer (B2C) market and a competitive inter-dealer (B2B) market. Dealers face inventory constraints and adverse selection. We characterize the optimal quote setting and inventory management behavior for both...

The eurozone has a single short-term nominal interest rate, but monetary policy conditions measured by either real short-term interest rates or Taylor rule residuals varied substantially across countries in the period from 2003-2010. We use this cross-country variation in the (local) tightness...

The large regional variation in minimum wage levels in the period 2002-08 in China implies that Chinese manufacturing firms experienced competitive shocks as a function of firm location and their low-wage employment share. We find that minimum wage hikes accelerate the input substitution from...

This paper examines the quality of credit ratings assigned to banks in Europe and the United States by the three largest rating agencies over the past two decades. We interpret credit ratings as relative assessments of creditworthiness, and define a new ordinal metric of rating error based on...

When innovation is cumulative, patent protection on early inventions can generate holdup problems if later complementary patents are owned by different firms. Consistent with the property rights literature, we show that shareholder ownership overlap across firms with patent complementarities...

The paper evaluates the impact of the Chinese minimum wage policy on consumption of low income household for the period 2002-2009. Using a representative household panel, we find that the consumption response to minimum wage hikes is increasing in the minimum wage share of household income. In...

We examine international equity allocations at the fund level and show how different returns on the foreign and domestic proportion of portfolios determine rebalancing behavior and trigger capital flows. We document the heterogeneity of rebalancing across fund types, its greater intensity under...

Following the 2008-9 financial crisis, large banks increasingly issued contingent convertible bonds (CoCo bonds) to increase their capital buffers – a policy supported by national bank regulators. This paper examines whether the issuance of CoCo bonds provides the same reduction in bank...