The experience of a large number of countries since the mid-1970s has demonstrated the limited potential for activist monetary and fiscal policies to influence real macroeconomic performance on a sustained basis. Given the central role of the financial sector in pricing and allocating capital...

This paper examines households' financial fragility by looking at their capacity to come up with $2,000 in 30 days. Using data from the 2009 TNS Global Economic Crisis survey, we document widespread financial weakness in the United States: Almost half of Americans report that they are incapable...

This article provides the first indepth analysis of the homeownership experience of homeowners in bankruptcy. These homeowners are typically seriously delinquent on their mortgages at the time of filing. We measure how often they end up losing their houses in foreclosure, the time between...

One criticism of the estate tax is that it prevents the owners of family businesses from passing their enterprises onto their children. The problem is that it may be difficult to pay estate taxes without liquidating the business. A natural question is why individuals with such concerns do not...

This paper experimentally studies the impact of uncertainty about bank and borrower fundamentals on loan repayment. We find that solvent borrowers are more likely to default strategically when stricter disclosure creates common knowledge about bank weakness. Borrowers are also less likely to...

The future of housing finance is in a state of flux. In February 2011, the Obama Administration released a proposal outlining three plans for the future of housing finance. In all three plans, Freddie Mac and Fannie Mae will be phased out over a period of years and replaced with a private...

Model uncertainty hampers consensus on the main determinants of corporate default. We employ Bayesian model averaging (BMA) techniques in order to shed light on this issue. Empirical findings suggest that the most robust determinants of corporate default are firm-specific variables such as the...

An important source of inefficiency in long-term debt contracts is the debt dilution problem, wherein a borrower ignores the adverse impact of new borrowing on the market value of outstanding debt and, therefore, borrows too much and defaults too frequently. A commonly proposed remedy to the...

Credit risk models used in quantitative risk management treat credit risk analysis conceptually like a single person decision problem. From this perspective an exogenous source of risk drives the fundamental parameters of credit risk: probability of default, exposure at default and the recovery...

In an earlier paper, we investigate whether hedge funds experience worst return contagion — that is, correlations in extremely poor returns that are over and above those expected from economic fundamentals.We find strong evidence of contagion among hedge funds using eight separate style...