Search Results
Working Paper
On the Economics of Discrimination in Credit Markets
This paper develops a general equilibrium model of both taste-based and statistical discrimination in credit markets. We find that both types of discrimination have similar predictions for intergroup differences in loan terms. The commonly held view has been that if there exists taste-based discrimination, loans approved to minority borrowers would have higher expected profitability than to majorities with comparable credit background. We show that the validity of this profitability view depends crucially on how expected loan profitability is measured. We also show that there must exist ...
Working Paper
Trading Relationships in the OTC Market for Secured Claims : Evidence from Triparty Repos
We use a new panel data set on intraday transactions of triparty repos (TPR) to study trading relationships in the over-the-counter market. We test the prediction that search frictions lead to relationship formation. We find that TPR trading parties form relationships with a broad number of counterparties but tend to focus their transaction volumes on only a small set of counterparties. We also find that having stable relationships and broader interactions across other funding markets positively shapes the relationships of investors with dealers in the TPR market. Finally, our results suggest ...
Working Paper
Credit supply to personal bankruptcy filers: evidence from credit card mailings
Are consumers who have filed for personal bankruptcy before excluded from the unsecured credit market? Using a unique data set of credit card mailings, we directly explore the supply of unsecured credit to consumers with the most conspicuous default risk--those with a bankruptcy history. On average, over one-fifth of personal bankruptcy filers receive at least one offer in a given month, with the likelihood being even higher for those who filed for bankruptcy within the previous two years. However, offers to bankruptcy filers carry substantially less favorable terms than those to comparable ...
Working Paper
Inflation and the size of government
It is commonly supposed in public and academic discourse that inflation and big government are related. We show that economic theory delivers such a prediction only in special cases. As an empirical matter, inflation is significantly positively related to the size of government mainly when periods of war and peace are compared. We find a weak positive peacetime time series correlation between inflation and the size of government and a negative cross-country correlation of inflation with non-defense spending.
Working Paper
Household borrowing after personal bankruptcy
A large literature has examined factors leading to filing for personal bankruptcy, but little is known about household borrowing after bankruptcy. Using data from the Survey of Consumer Finances, we find that relative to comparable nonfilers, bankruptcy filers generally have more limited access to unsecured credit but borrow more secured debt post bankruptcy, and they pay higher interest rates on all types of debt. We also find that credit access and borrowing costs improve as more time passed since filing. However, filers experience renewed debt payment difficulties and accumulate less ...
Working Paper
Institutional herding in the corporate bond market
We find substantial herding in U.S. corporate bonds among bond fund managers, much higher than that previously documented for the equity market. Herding is generally stronger among illiquid bonds, and buy herding and sell herding are driven by different factors. In particular, sell herding increases on negative news about bond ratings and corporate earnings. Interestingly, increases in ex-post transparency in corporate bond trading through Trade Reporting and Compliance Engine (TRACE) led to higher buy herding but not to higher sell herding. Finally, we find significant return reversals in ...
Working Paper
Information and Liquidity of OTC Securities : Evidence from Public Registration of Rule 144A Bonds
The Rule 144A private debt represents a significant and growing segment of the U.S. bond market. This paper examines the market liquidity effects of enhanced information disclosure induced by the public registration of 144A bonds. Using the regulatory version of TRACE data for the period 2002-2013, we find that following public registration of 144A bonds, dealer-specific effective bid-ask spreads narrow, especially for issues with higher ex-ante information asymmetry. Our results are consistent with existing theories that disclosure reduces information risk and thus improves market liquidity.
Working Paper
On the economics of discrimination in credit markets
This paper develops a general equilibrium model of both taste-based and statistical discrimination in credit markets. We find that both types of discrimination have similar predictions for intergroup differences in loan terms. The commonly held view has been that if there exists taste-based discrimination, loans approved to minority borrowers would have higher expected profitability than to majorities with comparable credit background. We show that the validity of this profitability view depends crucially on how expected loan profitability is measured. We also show that there must exist ...
Discussion Paper
The Runnables
In this note, we describe a measure of "runnable liabilities," or simply "runnables," as a tool in monitoring run vulnerability, in terms of both its aggregate size and its composition, in the economy. We first define runnables, and then describe our estimation approach and discuss empirical properties of our estimates.
Working Paper
Institutional Herding and Its Price Impact : Evidence from the Corporate Bond Market
Among growing concerns about potential financial stability risks posed by the asset management industry, herding has been considered as an important risk amplification channel. In this paper, we examine the extent to which institutional investors herd in their trading of U.S. corporate bonds and quantify the price impact of such herding behavior. We find that, relative to what is documented for the equity market, the level of institutional herding is much higher in the corporate bond market, particularly among speculative-grade bonds. In addition, mutual funds have become increasingly likely ...