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Discussion Paper
The Impact of the Corporate Credit Facilities
Boyarchenko, Nina; Kovner, Anna; Shachar, Or (2020-10-01)
American companies have raised almost $1 trillion in the U.S. corporate bond market since March. If companies had been unable to refinance those bonds, their inability to repay may have led to an immediate default on all of their obligations, creating a cascade of defaults and layoffs. Based on Compustat data, an inability to access public bond markets could have affected companies employing more than 16 million people. In this post, we document the impact of the Primary Market and Secondary Market Corporate Credit Facilities (PMCCF and SMCCF) on bond market functioning, summarizing a ...
Liberty Street Economics , Paper 20201001

Report
The Theory of Financial Stability Meets Reality
Boyarchenko, Nina; Hachem, Kinda; Kleymenova, Anya V. (2025-06-01)
A large literature at the intersection of economics and finance offers prescriptions for regulating banks to increase financial stability. This literature abstracts from the discretion that accounting standards give banks over financial reporting, creating a gap between the information assumed to be available to regulators in models of optimal regulation and the information available to regulators in reality. We bridge insights from the economics, finance, and accounting literatures to synthesize knowledge about the design and implementation of bank regulation and identify areas where more ...
Staff Reports , Paper 1155

Report
Corporate Credit Provision
Mueller, Philippe; Boyarchenko, Nina; Elias, Leonardo (2019-08-01)
Productive firms can access credit markets directly—by issuing corporate bonds—or in an intermediated manner—by borrowing through loans. In this paper, we study how the macroeconomic environment, including inflation, the stage of business cycle, and the stance of monetary policy, affects firms’ decisions of which debt market to access. Tighter monetary policy leads to firms borrowing more using intermediated credit, while higher inflation rates lead firms to lock in financing rates by issuing corporate bonds. Moreover, we also explore the role that heterogeneity in leverage across ...
Staff Reports , Paper 895

Report
Dealer balance sheets and bond liquidity provision
Boyarchenko, Nina; Adrian, Tobias; Shachar, Or (2016-12-01)
Do regulations decrease dealer ability to intermediate trades? Using a unique data set of dealer-bond-level transactions, we link changes in liquidity of individual U.S. corporate bonds to dealers? transaction activity and balance sheet constraints. We show that, prior to the financial crisis, bonds traded by more levered institutions and institutions with investment-bank-like characteristics were more liquid but this relationship reverses after the financial crisis. In addition, institutions that face more regulations after the crisis both reduce their overall volume of trade and have less ...
Staff Reports , Paper 803

Report
Liquidity policies and systemic risk
Adrian, Tobias; Boyarchenko, Nina (2014-12-01)
The growth of wholesale-funded credit intermediation has motivated liquidity regulations. We analyze a dynamic stochastic general equilibrium model in which liquidity and capital regulations interact with the supply of risk-free assets. In the model, the endogenously time-varying tightness of liquidity and capital constraints generates intermediaries? leverage cycle, influencing the pricing of risk and the level of risk in the economy. Our analysis focuses on liquidity policies? implications for household welfare. Within the context of our model, liquidity requirements are preferable to ...
Staff Reports , Paper 661

Discussion Paper
Liquidity Policies and Systemic Risk
Adrian, Tobias; Boyarchenko, Nina (2014-04-17)
One of the most innovative and potentially far-reaching consequences of regulatory reform since the financial crisis has been the development of liquidity regulations for the banking system. While bank regulation traditionally focuses on requiring a minimum amount of capital, liquidity requirements impose a minimum amount of liquid assets. In this post, we provide a conceptual framework that allows us to evaluate the impact of liquidity requirements on economic growth, the creation of systemic risk, and household welfare. Importantly, the framework addresses both liquidity requirements and ...
Liberty Street Economics , Paper 20140417

Discussion Paper
Counterparty Risk in Material Supply Contracts
Boyarchenko, Nina (2015-02-09)
Forming long-term partnerships with customers and suppliers often creates a competitive advantage for firms because it permits resource sharing, eases financial constraints, and encourages investment in relationship-specific capital. While these relationships can be beneficial, they also increase firms? exposure to their counterparties? risk. In a recent Staff Report, Anna Costello of MIT and I study two important and unanswered questions about supply relationships. First, what specific characteristics of the trade relationship make a firm more vulnerable to adverse spillovers from their ...
Liberty Street Economics , Paper 20150209

Working Paper
Financial Stability Considerations for Monetary Policy: Theoretical Mechanisms
Ajello, Andrea; Boyarchenko, Nina; Gourio, François; Tambalotti, Andrea (2022-02-15)
This paper reviews the theoretical literature at the intersection of macroeconomics and finance to draw lessons on the connection between vulnerabilities in the financial system and the macroeconomy, and on how monetary policy affects that connection. This literature finds that financial vulnerabilities are inherent to financial systems and tend to be procyclical. Moreover, financial vulnerabilities amplify the effects of adverse shocks to the economy, so that even a small shock to fundamentals or a small revision of beliefs can create a self-reinforcing feedback loop that impairs credit ...
Finance and Economics Discussion Series , Paper 2022-005

Journal Article
Trends in credit basis spreads
Gupta, Pooja; Yen, Jacqueline; Steele, Nick; Boyarchenko, Nina (2018-24-02)
Market participants and policymakers were surprised by the large, prolonged dislocations in credit market basis trades during the second half of 2015 and the first quarter of 2016. In this article, we examine three explanations proposed by market participants: increased idiosyncratic risks, strategic positioning by asset managers, and regulatory changes. We find some evidence of increased idiosyncratic risk during the relevant period, but limited evidence of asset managers changing their positioning in derivative products. Although we cannot quantify the contribution of these two channels to ...
Economic Policy Review , Issue 24-2 , Pages 15-37

Report
Flighty liquidity
Giannone, Domenico; Boyarchenko, Nina; Shachar, Or (2018-10-01)
We study how the risks to future liquidity flow across corporate bond, Treasury, and stock markets. We document distribution ?flight-to-safety? effects: a deterioration in the liquidity of high-yield corporate bonds forecasts an increase in the average liquidity of Treasury securities and a decrease in uncertainty about the liquidity of investment-grade corporate bonds. While the liquidity of Treasury securities both affects and is affected by the liquidity in the other two markets, corporate bond and equity market liquidity appear to be largely divorced from each other. Finally, we show that ...
Staff Reports , Paper 870

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