In the period prior to the financial crisis, leverage in the financial system increased substantially. This buildup was likely facilitated by, among other factors, a loosening of credit terms related to OTC derivatives and securities financing transactions. However, little or no systematic data...

Although the instruments and transactions most closely associated with the financial crisis of 2008 and 2009 were novel, the underlying themes that played out in the crisis were familiar from previous episodes: Competitive dynamics resulted in excessive leverage and risk-taking by large,...

We review recent changes in monetary policy that have led to development and testing of an overnight reverse repurchase agreement (ON RRP) facility, an innovative tool for implementing monetary policy during the normalization process. Making ON RRPs available to a broad set of investors,...

This paper examines the choice of exchange rate regime in EU candidate countries during the process of accession to the European Monetary Union (EMU). In the presence of real exchange rate appreciation due to the Balassa-Samuelson effect, candidate countries face a trade-off between trend...

A number of researchers have recently argued that the growth of the shadow banking system in the years preceding the recent U.S. financial crisis was driven by rising demand for "money-like" claims--short-term, safe instruments (STSI)--from institutional investors and nonfinancial firms. These...

We quantify the cross-sectional and time-series behavior of the wedge between the cost of external and internal finance by estimating the structural parameters of a canonical debt-contracting model with informational frictions. For this purpose, we construct a new dataset that includes balance...