How does investors' information about a country's fundamentals, and the fact that this information may be asymmetrically held, affect a country's financing cost? Motivated by this question, and by the observation that sovereign bonds are usually auctioned in large lots to a large number of...

Recent regulations in the U.S. and Europe incentivize the use of central counterparty clearing houses (CCP) to clear derivatives, arguably to create a less complex and more transparent interbank network that is less prone to financial instabilities. We construct a network model with endogenous...

The COVID-19 policy responses represent an unprecedented challenge. Policy- makers worldwide, have to react fast to a totally new type of crisis under enhanced public scrutiny, as their policies are immediately compared across countries. We show how relative comparisons induce herding when...

Dealing with pandemics, such as the recent COVID-19 virus, has highlighted the critical role of social distancing to avoid contagion and deaths. New technologies that allow replacing in-person for at-distance activities have blurred the mapping between social and economic distancing. In this...

It depends what we want to measure. Most literature has focused on observed flow of savings (per-period savings as fraction of GDP), which has declined persistently since 1980. Even though this decline means that fewer funds are available for investment in each period, it does not follow that...

Central banks provide public liquidity to traditional (regulated) banks with the intention of stabilizing the financial system. Shadow banks are not regulated, yet they indirectly access such liquidity through the interbank system. We build a model that shows how public liquidity provision may...

Using bid-level data from discriminatory auctions for Mexican government bonds, we demonstrate that asymmetric information about default risk is a key friction in sovereign bond markets. We document that large bidders achieve higher bid acceptance rates than other bidders despite paying no more...

We develop a theory of information spillovers in sovereign bond markets in which investors can acquire information about default risk before trading in primary and secondary markets. If primary markets are structured as multi-unit discriminatory-price auctions, an endogenous winner's curse leads...