Search Results
Working Paper
Credit market competition and capital regulation
Market discipline for financial institutions can be imposed not only from the liability side, as has often been stressed in the literature on the use of subordinated debt, but also from the asset side. This will be particularly true if good lending opportunities are in short supply, so that banks have to compete for projects. In such a setting, borrowers may demand that banks commit to monitoring by requiring that they use some of their own capital in lending, thus creating an asset market-based incentive for banks to hold capital. Borrowers can also provide banks with incentives to monitor ...
Working Paper
On Interest Rate Policy and Asset Bubbles
In a provocative paper, Gal (2014) showed that a policymaker who raises interest rates to rein in a potential bubble will only make a bubble bigger if one exists. This poses a challenge to advocates of lean-against-the-wind policies that call for raising interest rates to mitigate potential bubbles. In this paper, we argue there are situations in which the lean-against-the wind view is justified. First, we argue Gal?s framework abstracts from the possibility that a policymaker who raises rates will crowd out resources that would have otherwise been spent on the bubble. Once we modify Gal?s ...
Working Paper
A Comment on Monetary Policy and Rational Asset Price Bubbles
Galí (2014) showed that a monetary policy rule that raises interest rates in response to bubbles can paradoxically lead to larger bubbles. This comment shows that a central bank that wants to dampen bubbles can always do so by raising interest rates aggressively enough. This result is different from the Miao, Shen and Wang (2019) comment on Galí’s paper. They argue Galí’s model contains additional equilibria in which more aggressive rules dampen bubbles. We show that for these equilibria, more aggressive rules involve threats to raise interest rates more than actual rate increases.
Conference Paper
Bank competition and the role of regulation
Market discipline for financial institutions can be imposed not only from the liability side, as has often been stressed in the literature on the use of subordinated debt, but also from the asset side. This will be particularly true if good lending opportunities are in short supply, so that banks have to compete for projects. In such a setting, borrowers may demand that banks commit to ?monitoring? by requiring that they use some of their own capital in lending, thus creating a market-based incentive for banks to hold capital that stems purely from the asset side of the bank?s balance sheet. ...
Working Paper
Fintech, Cryptocurrencies, and CBDC: Financial Structural Transformation in China”
Fintech and decentralized finance have penetrated all areas of the financial system and have improved financial inclusion in the last decade. In this paper, we review the recent literature on fintech, cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs). There are important implications from the rise of fintech and the introduction of stablecoins and CBDCs in recent years. We provide an overview of China’s experience in fintech, focusing on payments, digital banking, fintech lending, and the recent progress on its CBDC pilots (e-CNY). We also discuss important ...
Working Paper
A Survey of Fintech Research and Policy Discussion
The intersection of finance and technology, known as fintech, has resulted in the dramatic growth of innovations and has changed the entire financial landscape. While fintech has a critical role to play in democratizing credit access to the unbanked and thin-file consumers around the globe, those consumers who are currently well served also turn to fintech for faster services and greater transparency. Fintech, particularly the blockchain, has the potential to be disruptive to financial systems and intermediation. Our aim in this paper is to provide a comprehensive fintech literature survey ...
Conference Paper
The role of liquidity in financial crises
Journal Article
Commentary on Monetary policy and financial market evolution
Conference Paper
Commentary: the ‘big C”: identifying and mitigating contagion