We build a model with heterogeneous firms and banks to analyze how policy can affect the efficiency of credit allocation and long-term economic outcomes. When transitory demand or productivity shocks are small, conventional monetary policy can restore efficient bank lending and production by...

We document that the convenience yield of U.S. Treasuries exhibits properties that are consistent with a hedging perspective of safe assets. The convenience yield tends to be low when the covariance of Treasury returns with the aggregate stock market returns is high. A decomposition of the...

We study the rise and risks in bank issuance of Wealth Management Products (WMPs), which are off-balance-sheet substitutes for deposits without the regulatory interest rate ceilings and constitute the largest shadow banking segment in China. We show that competition for deposits has a causal...

When the Federal Reserve (Fed) expanded its balance sheet via quantitative easing (QE), commercial banks financed reserve holdings with deposits and reduced their average maturity. They also issued lines of credit to corporations. However, when the Fed halted its balance-sheet expansion in 2014...

Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart increase in commercial bank liabilities, such as short-term deposits issued to finance...

When the Federal Reserve expanded its balance sheet via large-scale asset purchases (quantitative easing) in recent years, we find an increase in commercial bank deposits with a shortening of their maturity, and also an increase in outstanding bank lines of credit to corporations. However, when...

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The standard argument - that banks can - hinges on deposit inflows that are seeking a safe haven and provide banks with a natural hedge to fund drawn credit lines and other commitments....

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...

Can banks maintain their advantage as liquidity providers when exposed to a financial crisis? While banks honored their credit lines drawn by firms during the 2007-09 crisis, this provision of liquidity by banks was only possible because of explicit, large support from the government and...

Can banks maintain their advantage as liquidity providers when exposed to a financial crisis? While banks honored their credit lines drawn by firms during the 2007-09 crisis, this provision of liquidity by banks was only possible because of explicit, large support from the government and...