House prices and mortgage debt surged more in zip codes with a higher concentration of subprime borrowers in the years prior to the Great Recession. The authors present a model that further distinguishes between types of borrowers and extends the time period being studied. Their model closely reproduces findings that subprime households take on disproportionately more debt when the supply of credit increases.
The authors explore the role of capital flows and exchange rates in shaping the global economy's adjustment in a liquidity trap. They use a multi-country model to analyze the adjustment since the Great Recession, a period during which many advanced economies were pushed to the zero bound on interest rates. Their findings underscore the importance of international policy coordination.
The authors build a structural model that captures the significant features of personal bankruptcy under Chapter 13. Their model predicts that the more stringent provisions of Chapter 13, in particular those
that force subsets of debtors to file for long-term plans, would not materially affect creditor recovery rates or make discharge materially more likely for those debtors.
Banks require liquidity to meet unexpected shocks and they can obtain this liquidity from other banks by selling marketable securities. The authors propose a model to analyze the liquidity choices of banks. They suggest that, depending on parameter values, banks may choose to maintain an amount of liquidity that exceeds or falls short of the socially optimal amount.
Jobs have been moving from manufacturing into service industries for decades. The authors propose a decomposition framework to assess the contributions of various margins of firm dynamics to the reallocation of employment across sectors. They find that at least 50 percent of the change is owing to the allocation of startup employment.
The author introduces a structural asset pricing model to analyze market reactions to deal announcements, explain various features of merger arbitrage returns, and deliver accurate forecasts for deal outcomes.
Banks attract customers and bolster loyalty by offering more ATMs, longer hours, and other services. The authors study the bright and dark side of a bank’s services, analyzing whether service quality is associated with a bank’s funding structure, funding costs and liquidity risk, and asset quality and soundness.