We measure market reactions to announcements concerning liquidity regulation, a key innovation in the Basel framework. Our initial results show that liquidity regulation attracts negative abnormal returns. However, the price responses are less pronounced when coinciding announcements concerning...

We propose a model that links the conditional probability of bank failure to insolvency and liquidity risks, and show that liquidity risk affects bank failures through systematic and idiosyncratic channels. Empirical results based on U.S. bank data between 1985 and 2011 show that this model...

I present a dynamic general equilibrium model in which financial interconnectedness endogenously changes over the business cycle and shapes systemic risk. To share individual risks, banks become interconnected through holding overlapping asset portfolios. Diversification reduces individual...

We explore the implications of shocks to expected future productivity in a setting with limited enforcement of financial contracts. As in Lorenzoni andWalentin (2007) optimal financial contracts under limited enforcement imply that to obtain external finance firms have to post collateral in...

Recent studies proposed news about future technology growth as the main driver of macroeconomic fluctuations. The identification of these news through stock prices in SVARs has been criticized in the past. Therefore, I propose a series of experiments to test that hypothesis by examining its...