Search Results
Speech
The Impact of the Pandemic on Cultural Capital in the Finance Industry
Remarks at the Risk USA Conference (delivered via videoconference).
Discussion Paper
How Large are Default Spillovers in the U.S. Financial System?
When a financial firm defaults on its counterparties, the counterparties may in turn become unable to pay their own creditors, and so on. This domino effect can quickly propagate through the financial system, creating undesirable spillovers and unnecessary defaults. In this post, the authors use the framework discussed in the first post of this two-part series to answer the question: How vulnerable is the U.S. financial system to default spillovers?
Working Paper
Mandatory Disclosure and Financial Contagion
This paper analyzes the welfare implications of mandatory disclosure of losses at financial institutions when it is common knowledge that some banks have incurred losses but not which ones. We develop a model that features contagion, meaning that banks not hit by shocks may still suffer losses because of their exposure to banks that are. In addition, we assume banks can profitably invest funds provided by outsiders, but will divert these funds if their equity is low. Investors thus value knowing which banks were hit by shocks to assess the equity of the banks they invest in. We find that when ...
Report
The Heterogeneous Impact of Referrals on Labor Market Outcomes
We document a new set of facts regarding the impact of referrals on labor market outcomes. Our results highlight the importance of distinguishing between different types of referrals—those from family and friends and those from business contacts—and different occupations. Then we develop an on-the-job search model that incorporates referrals and calibrate the model to key moments in the data. The calibrated model yields new insights into the roles played by different types of referrals in the match formation process, and provides quantitative estimates of the effects of referrals on ...
Working Paper
The Heterogeneous Impact of Referrals on Labor Market Outcomes
We document a new set of facts regarding the impact of referrals on labor market outcomes. Our results highlight the importance of distinguishing between different types of referrals—those from family and friends and those from business contacts—and different occupations. Then we develop an on-the-job search model that incorporates referrals and calibrate the model to key moments in the data. The calibrated model yields new insights into the roles played by different types of referrals in the match formation process and provides quantitative estimates of the effects of referrals on ...
Report
Do informal referrals lead to better matches? Evidence from a firm's employee referral system
The limited nature of data on employment referrals in large business and household surveys has so far limited our understanding of the relationships among employment referrals, match quality, wage trajectories, and turnover. Using a new, firm-level data set that includes explicit information on whether a worker was referred by a current employee of the company, we are able to provide rich detail on these empirical relationships for a single U.S. corporation, and to test various predictions of theoretical models of labor market referrals. Predictions with which our results align include: 1) ...
Journal Article
When It Rains, It Pours: Cyber Vulnerability and Financial Conditions
We analyze how systemic cyber risk relates to the financial cycle and show that the potential impact of a cyberattack is systematically greater during stressed financial conditions. This has been true over the past two decades, particularly at the onset of the COVID-19 pandemic, when changes in payment activity increased vulnerability by approximately 50 percent relative to the rest of 2020 through more concentration and intraday liquidity stress. We evaluate the effectiveness of policy interventions used to stabilize markets and mitigate cyber vulnerability. We argue that cyber and other ...
Working Paper
Supply Chain Networks and the Macroeconomic Expectations of Firms
In a randomized control trial of customer-supplier firm pairs in New Zealand, we treat with information one firm in a pair and analyze the treatment's effects on the expectations and actions of both the directly treated firms (direct effect) and connected firms that did not directly receive information (spillover effect). The direct and spillover effects on expectations and actions are significant and of comparable magnitude. Higher expected future real GDP growth increases prices and employment, while greater uncertainty about it reduces prices, investment, and employment. We show that ...
Working Paper
Efficient Public Good Provision in Networks : Revisiting the Lindahl Solution
The provision of public goods in developing countries is a central challenge. This paper studies a model where each agent?s effort provides heterogeneous benefits to the others, inducing a network of opportunities for favor-trading. We focus on a classical efficient benchmark ? the Lindahl solution ? that can be derived from a bargaining game. Does the optimistic assumption that agents use an efficient mechanism (rather than succumbing to the tragedy of the commons) imply incentives for efficient investment in the technology that is used to produce the public goods? To show that the answer is ...
Working Paper
Filling in the Blanks: Network Structure and Interbank Contagion
The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures. This paper proposes an efficient alternative that combines information-theoretic arguments with economic incentives to produce more realistic interbank networks that preserve important characteristics of the original interbank market. The method loads the most probable links with the largest exposures consistent with the total lending and borrowing of each bank, yielding ...