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We investigate the unintended consequences of the Home Affordable Refinance Program (HARP). Originally designed to help borrowers refinance after the 2008–09 global financial crisis, HARP inadvertently strengthened the market power of incumbent lenders by creating a cost advantage for them. Despite a 2013 policy rectifying this cost advantage, we still find significant welfare losses for borrowers.

Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets.

We develop a dynamic model to capture key features of decentralized finance lending. We identify a price-liquidity feedback: the market outcome in any given period depends on agents' expectations about lending activities in future periods, with higher future price expectations leading to more lending and higher prices in that period.

We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups.

How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability.

We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices.

Using stock market data on banks, we show that the book value of loans recognizes losses with a delay. This delayed accounting is important for regulation because the requirements regulators impose are based on book values.

Changes in survey mode (e.g., online, offline) may influence the values of survey responses, and may be particularly problematic when comparing repeated cross-sectional surveys.

Using highly disaggregated transaction-level trade data, we document the importance of new firm-level trade partner relationships and the addition of new products to existing relationships in driving aggregate trade flows.

This paper develops a stress-testing framework in which banks strategically adjust their balance sheets in response to regulatory constraints and market conditions. Applied to Canada’s largest banks, it quantifies the effects of macroprudential policies on lending and identifies systemic vulnerabilities through reverse stress testing.