Many economists and policy-makers believe that bailouts of systemically important financial institutions (SIFIs), though unavoidable ex post, are inefficient ex ante: The expectation of such bailouts is said to lead to moral hazard in the form of excessive risk taking. We argue that this view...

Ongoing financial innovation and greater information availability increase the tradability of bank assets and reduce banks' dependence on individual bank managers as private information in the lending process declines. In this paper we argue that this has two effects on banks, with opposing...

During the past two decades 130 of the 182 IMF member countries have experienced serious problems in their banking sectors or an outright banking crisis. Among the stylized facts about these crises are their often systemic nature, a pronounced boom-bust cyde and substantial financial involvement...

Fair value refers to current values as the backbones of accounting measurements. Current value follows the efficient financial market (EFM) hypothesis - which abstracts away from economic realization - as guidance for the financial market investment process through ignorance and hazard. This...

During the global financial crisis, a large number of banks worldwide either failed or received financial aid thus inflicting substantial losses on the system. We contribute to the early warning literature by constructing a dynamic competing risks hazard model that explores the joint...

The autonomous vehicle (“AV”) industry faces the following ethical question: “How do we know when our AV technology is safe enough to deploy at scale?” The search for an answer to this question is the “AV Problem.” This essay examines that question through the lens of the July 15,...

We build a model of the financial sector to explain why adverse asset shocks in good economic times lead to a sudden drying up of liquidity. Financial firms raise short-term debt in order to finance asset purchases. When asset fundamentals worsen, debt induces firms to risk-shift; this limits...

The purpose of this research is to examine the interaction between financial stress and conflict risk having impacts on financial instruments in capital markets within an interdisciplinary frame. The Fuzzy TOPSIS method is applied in order to analyze effects of conflict hazard on capital markets...

We present a framework that clarifies the financial role of the IMF, the rationale for conditionality, and the conditions under which IMF-induced moral hazard can arise. In the model, traditional conditionality commits country authorities to undertake crisis resolution efforts, facilitating the...