We formalize the idea that the financial sector can be a source of non-fundamental risk. Households' desire to hedge … against price volatility can generate price volatility in equilibrium, even absent fundamental risk. Fearing that asset prices … may fall, risk-averse households demand safe assets from leveraged intermediaries, whose issuance of safe assets exposes …

We model a safe asset market with investors valuing safety, investors valuing liquidity, and constrained dealers. While … safety investors and liquidity investors can interact symbiotically with offsetting trades in times of stress, we show that … liquidity investors' strategic interaction harbors the potential for selffulfilling fragility. Surprisingly, standard flight to …

and reserve requirements are analysed for their effect on the risk of severe downturns. We develop an agent … stringent liquidity regulations are best to dampen output fluctuations and prevent severe downturns. Under such regulations both …

We model a safe asset market with investors valuing safety, investors valuing liquidity, and constrained dealers. While … safety investors and liquidity investors can interact symbiotically with offsetting trades in times of stress, we show that … liquidity investors’ strategic interaction harbors the potential for self-fulfilling fragility. Surprisingly, standard flight to …

We investigate the extent to which various structural risks exacerbate the materialization of cyclical risk. We use a … role in explaining the severity of cyclical and credit risk materialization during financial cycle contractions. Among …

Recent financial crisis showed how the unfolding of liquidity risks of financial intermediaries spilled over to asset … markets, contributing to asset price deterioration and the triggering of liquidity spirals. This paper derives and tests a … aggregate funding liquidity risks of the banking system into a simple binary fragility indicator. The main empirical result of …

We develop a new theory of information production during credit booms. In our model, entrepreneurs need credit to …