This paper develops a model of the term structures of nominal and real interest rates driven by state variables representing the short-term real interest rate, expected inflation, inflation’s central tendency, and four volatility factors that follow GARCH processes. We derive analytical...

This study tries to get a sense of the topography of the regional banking landscape. We focus on bank holding companies and banks with $10 billion to $50 billion in assets and look for factors that potentially explain regional bank health from 2008 to 2013. Our dataset is a combination of bank...

Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? Moreover, does it matter if the recession is associated with a housing bust? We look at the American historical experience in an attempt to answer these questions. The...

Changes in net lending hide the much larger and more variable gross lending flows. We present a series of stylized facts about gross loan flows and how they vary over time, bank size, and the business cycle. We look at both the intensive (increases and decreases) and extensive (entry and exits)...

The authors apply a notion of power, defined for coalitions, which is derived from the Shapley value. They calculate the power of coalitions within a 12-person committee meant to correspond to the FOMC.

Using the yield curve helps forecast real growth over the period 1875 to 1997. Using both the level and slope of the curve improves forecasts more than using either variable alone. Forecast performance changes over time and depends somewhat on whether recursive or rolling out of sample...

An argument that in a costly state verification model of financial contracting, relaxing the assumption of perfect verification makes the measurement of information difficult.

The relatively infrequent nature of major credit distress events makes a historical approach particularly useful. Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress...

An explanation of how irreversible investment and the techniques associated with pricing real options can apply to a broad range of problems in finance, macroeconomics, and trade policy.

Recent advances in asset pricing-the reduced-form approach to pricing risky debt and derivatives-are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. The authors find that credit spreads on both fixed- and floating-rate subordinated debt provide...