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Bank regulation presumes risks spill over more easily from large banks to the banking system than vice versa. Interestingly, we observe this is not the case. We find that the capacity to transmit risk is larger in the system-to-bank direction, leading to an increased default risk.

This paper documents a systematic pattern of how wages, hours and their relationship vary across firms of different sizes. Using a model with heterogeneous firms and workers, we show how the interplay between wages, hours and firm size affect worker sorting and inequality.

Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

This paper studies the implications of model uncertainty for wealth distribution in a tractable general equilibrium model with a borrowing constraint and robustness à la Hansen and Sargent (2008). Households confront model uncertainty about the process driving the return of the risky asset, and they choose robust policies.

In theory, nominal exchange rate movements can lead to “expenditure switching” when they generate changes in the relative prices of goods across countries. This paper explores whether the expenditure-switching role of exchange rates has changed in the current episode of significant global imbalances.

The authors use the efficient hedging methodology for optimal pricing and hedging of equity-linked life insurance contracts whose payoff depends on the performance of several risky assets.

We quantify the effects of large-scale stock purchases by a central bank and compare these to bond purchases. We find that the central bank’s equity purchases would lower the risk and term premiums on stocks and long-term bonds, respectively, and thereby stimulate economic activity.

We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities.

I study the welfare consequences of regulations on high-cost consumer credit in the United States and find that borrowing limits have distributional impacts on households with self-control issues.

We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk.