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Keywords:financial sector 

Working Paper
Inflation and Financial Sector Size

Traditionally, the cost of expected inflation has been seen as the "shoeleather cost" of going to the bank more often. This paper focuses on the other side of these transactions--i.e., on the increased production of financial services by financial firms. I construct a model in which households must make purchases either with cash or with costly transactions services produced by firms in the financial services sector. Higher inflation leads households to substitute purchased transactions services for money balances, increasing the size of the financial sector. A test of the model using ...
Finance and Economics Discussion Series , Paper 1996-16

Discussion Paper
Assessing Contagion Risk in a Financial Network

Since the 2008 financial crisis, there has been an explosion of research trying to understand and quantify the default spillovers that can arise through counterparty risk. This first of two posts delves into the analysis of financial network contagion through this spillover channel. The authors introduce a framework, originally developed by Eisenberg and Noe, that is useful for thinking about default cascades.
Liberty Street Economics , Paper 20190624

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?
Liberty Street Economics , Paper 20190626

Viewing the U.S. Financial Structure from the Financial Crisis to the Pandemic

The 2007-08 crisis reshaped the U.S. financial sector, yet the makeup of asset holdings by key sectors remained largely unchanged between 2007 and 2019.
On the Economy

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