We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. The model predictions align with some stylized facts about the large sales of corporate bonds and Treasury securities during the COVID-19 economic...

This paper presents a general equilibrium, monetary model of bank runs to study monetary injections during financial crises. When the probability of runs is positive, depositors increase money demand and reduce deposits; at the economy-wide level, the velocity of money drops and deflation...

We study optimal capital requirement regulation in a dynamic quantitative model in which nonfinancial firms, as well as households, hold deposits. Firms hold deposits for precautionary reasons and to facilitate the acquisition of production inputs. Our theoretical analysis identifies a novel...

We study whether regulation that relies on historical cost accounting (HCA) rather than mark-to-market accounting (MMA) to insulate banks' net worth from financial market volatility affects the transmission of quantitative easing (QE) through the bank lending channel. Using detailed supervisory...

This paper evaluates two key liquidity policies in the context of financial crises— liquidity requirements and central bank liquidity injections—using a model that includes near-money assets. A trade-off arises between the benefits for financial players subject to liquidity risk and those...

We propose a simple model to study the efficiency of private liquidity creation by financial intermediaries. Liquidity is provided by both safe and risky debt, and liquidity crises arise when risky debt is defaulted on and stops providing liquidity services. Because of a novel externality...

We study how the European Central Bank’s quantitative easing (QE) program announced in January 2015 affected lending by Italian banks. Banks exposed to QE, especially the more illiquid ones, increased lending relatively more at both the intensive and extensive margins after QE. But we also...

We analyze the effects of (not) bailing out uninsured deposits in a quantitative, general equilibrium model in which firms’ deposits are valued for their safety and uninsured deposits might be bailed out by the government. Although an important fraction of households’ deposits are uninsured,...