Identifying the drivers of credit cycles is crucial for prudential regulation. We show in a model that investor sentiments result in excessive asset price movements, leading to sharp credit reversals. Motivated by this, we decompose fluctuations in stock prices into fundamental and noise shocks...

We study the effects of shadow banking panics in a macroeconomic model with a rich financial system, including deposit-financed retail banks and wholesale-financed shadow banks. The model can quantitatively match the dynamics of key variables around the US financial crisis. Wholesale funding...

I study the business cycle dynamics of the maturity structure of the debt of U.S. non-financial firms. I document three facts: First, the aggregate share of long-term debt in total debt is pro-cyclical. Second, the long-term debt share of small firms has a higher standard deviation and...

Some regional banks are highly exposed to flood risk. Yet, there is little evidence that banks manage these exposures. The lack of flood risk management in these banks could worsen the adverse local economic impact of a flood. Therefore, banks should incorporate flood risk in their risk management.

We study the effects of shadow banking panics in a macroeconomic model with a rich financial system, including deposit-financed retail banks and wholesale-financed shadow banks. Shadow banking panics occur when retail banks choose not to roll over their lending to shadow banks. Occasionally...

The business cycle dynamics of firms' investment and debt maturity vary across the firm size and age distribution: Young and small firms have strongly pro-cyclical debt maturity and investment, old and large firms a-cyclical debt maturity and weakly pro-cyclical investment. This paper explores...