Search Results
Working Paper
Market-based regulation and the informational content of prices
Various laws and policy proposals call for regulators to make use of the information reflected in market prices. We focus on a leading example of such a proposal, namely that bank supervision should make use of the market prices of traded bank securities. We study the theoretical underpinnings of this proposal in light of a key problem: if the regulator uses market prices, prices adjust to reflect this use and potentially become less revealing. We show that the feasibility of this proposal depends critically on the information gap between the market and the regulator. Thus, there is a strong ...
Journal Article
Creative destruction in local markets
This article uses a panel of Texas restaurants' and bars' alcohol to measure the pace of creative destruction--the ongoing replacement of unproductive competitors with the new firms--and it investigates whether producers in more concentrated markets might use their market power to stabilize the industry structure. The authors find the opposite to be true: Local markets with more concentrated alcohol sales display more creative destruction.
Working Paper
Market run-ups, market freezes, and leverage
The authors study trade between a buyer and a seller when both may have existing inventories of assets similar to those being traded. They analyze how these inventories affect trade, information dissemination, and price formation. The authors show that when the buyer's and seller's initial leverage is moderate, inventories increase price and trade volume, but when leverage is high, trade may become impossible (a "market freeze"). Their analysis predicts a pattern of trade in which prices and trade volume first increase, and then markets break down. The authors use their model to discuss ...
Working Paper
Market run-ups, market freezes, inventories, and leverage
This paper is superseded by Working Paper No. 13-14.> We study trade between a buyer and a seller who have existing inventories of assets similar to those being traded. We analyze how these inventories affect trade, information dissemination, and prices. We show that when traders? initial leverages are moderate, inventories increase price and trade volume (a market ?run-up?), but when leverages are high, trade is impossible (a market ?freeze?). Our analysis predicts a pattern of trade in which prices and volumes first increase, and then markets break down. Moreover, the presence of competing ...
Journal Article
Conference explores relationship of markets, institutions
Roger Ferguson, then vice chairman of the Federal Reserve Board of Governors, spoke at an Atlanta Fed conference that explored the dynamics of the financial marketplace. Ferguson discussed reasons behind decades of relative U.S. economic stability.>
Journal Article
Opinion : In defense of failure
Journal Article
Beyond the border: Latin American market reforms put to the test
Working Paper
The rise in comovement across national stock markets: market integration or IT bubble?
A stylized fact in the portfolio diversification literature is that diversifying across countries is more effective than diversifying across industries in terms of risk reduction. But with the rise in comovement across national stock markets since the mid-1990s, this no longer appears to be true. We explore whether this change is driven by global integration and therefore likely to be permanent, or if it is a temporary phenomenon associated with the recent stock market bubble. Our results point to the latter hypothesis. In the aftermath of the bubble, diversifying across countries may ...
Journal Article
This little piggy restricted market access
Journal Article
The century of markets
We are in the midst of a great transition, from an age in which governments intervened in nearly every facet of economic affairs to one in which market forces not only make political borders transparent to commerce but also shape political policies. This Economic Commentary is adapted from the John Bonython Lecture given by Jerry L. Jordan, president and CEO of the Federal Reserve Bank of Cleveland, at the Centre for Independent Studies in Sydney, Australia, in November 1999.