We present a forward-looking monitoring program to identify and track the sources of systemic risk over time and to facilitate the development of preemptive policies to promote financial stability. We offer a framework that distinguishes between shocks, which are difficult to prevent, and...

In the conduct of monetary policy, there exists a risk-return trade-off between financial conditions and financial stability, which complements monetary policy's traditional trade-off between inflation and real activity. The trade-off exists even if monetary policy does not target financial...

This paper documents ldquo;runsrdquo; on asset-backed commercial paper (ABCP) programs using a novel dataset of all transactions in the U.S. market during its severe contraction in 2007. We find that one-third of programs were run within weeks of the onset of the ABCP crisis and that runs, as...

We extend the New Keynesian (NK) model to include endogenous risk. Lower interest rates not only shift consumption intertemporally but also conditional output risk via their impact on risk-taking, giving rise to a vulnerability channel of monetary policy. The model fits the conditional output...

Financial contracts that mitigate incentive conflicts between firms and their creditors have a large impact on employees. Using a regression discontinuity design, we provide evidence that there are sharp and substantial employment cuts following loan covenant violations, when creditors gain...

We define a measure to be a financial vulnerability if, in a VAR framework that allows for nonlinearities, an impulse to the measure leads to an economic contraction. We evaluate alternative macrofinancial imbalances as vulnerabilities: nonfinancial sector credit, risk appetite of financial...

This paper provides new evidence on the importance of employer stock in the 401(k) portfolios of individual investors, how investment decisions are affected by pension plan design, and what compels firms to offer matching contributions in company stock. After summarizing the quantitative...

Stock option grants to top executives and to employees below the top executive ranks have risen rapidly with stock prices in recent years. This paper examines the growth in stock option grants at Samp;P 1500 companies between 1996 and 1999, and estimates the pay-for-performance sensitivities of...

We examine how corporate payout policy is affected by managerial stock incentives using data on more than 1100 nonfinancial firms during 1993-97. We find that management share ownership encourages higher payouts by firms with potentially the greatest agency problems--those with low...