In a financial system where balance sheets are continuously marked to market, asset price changes show up immediately in changes in net worth, and elicit responses from financial intermediaries, who adjust the size of their balance sheets. We document evidence that marked to market leverage is...

The structural model in this paper proposes a micro-founded framework that incorporates an active banking sector with an oil-producing sector. The primary goal of adding a banking sector is to examine the role of an interbank market on shocks, introduce a national development fund and study its...

We provide empirical evidence of the causal effects of changes in financial intermediaries' net worth on the aggregate economy. Our strategy identifies financial shocks as high-frequency changes in the market value of intermediaries' net worth in a narrow window around their earnings...

Economic policy uncertainty aspects decisions of households, businesses, policy makers and financial intermediaries. We first examine the impact of economic policy uncertainty on aggregate bank credit growth. Then we analyze commercial bank entity level data to gauge the effects of policy...

Credit is key to support healthy and sustainable economic growth but excess aggregate credit growth can signal the build-up of imbalances and lead to systemic financial crisis. Hence, monitoring the credit cycle is key to identifying vulnerabilities, particularly in emerging markets, which tend...

This paper proposes a new theoretical framework for the analysis of the relationship between credit shocks, firm defaults and volatility. The key feature of the modelling approach is to allow for the possibility of default in equilibrium. The model is then used to study the impact of credit...

Better “financial soundness” of banks could help mitigate the volatility of financial cycles by reducing banks' risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit. Consistent with this...

The information banks have about borrowers drives their lending decisions and macroeconomic outcomes, but this information is inherently difficult to analyze because it is private. We construct a novel measure of bank information quality from confidential regulatory data that include banks’...

We study regime switching features of liquidity risk in corporate bond premiums. Within a sample period ranging from July 2002 to April 2015, we first compute a liquidity risk index for BBB bonds, which considers various liquidity risk facets based on principal component analysis. Second, we...

In credit portfolio modeling the asset correlation parameter is used to describe the degree of default rates fluctuations. In this article we estimate the asset correlation parameter for banks and other industry sectors from default data. We find that estimates of the asset correlation vary...