Search Results
Working Paper
Portfolio risks and bank asset choice
An investigation of the effects of credit risk and interest-rate risk on bank portfolio choices, showing how bank capital inadequacy may prevent a bank from investing in the optimal portfolio and how the efficiency of the bank's intermediation technology affects its choice of second-best portfolio.
Conference Paper
Payday lending: do the costs justify the price?
Report
Piggy banks: financial intermediaries as a commitment to save
Savers with uncertain life spans cannot stick to long-term investment plans when they invest directly in liquid assets. Before horizons are known, all savers will plan to roll over their short-term assets if returns turn out high. Ex post, the short-term investors will consume their liquid assets rather than reinvest them. Delegating investment decisions to an intermediary reduces the commitment problem, and leads to more efficient portfolios. The higher return to savings should also increase savings rates.
Journal Article
In search of the elusive credit view: testing for a credit channel in modern Great Britain
An examination of the credit performance of the financial sector in the modern British economy, showing that problems in credit markets associated with debt and default/liquidation can disrupt the production of real financial services necessary to channel funds to efficient investment opportunities.
Discussion Paper
Piggy Banks
What do banks do? Ask an economist and you’ll get a variety of answers. Banks play a vital role in allocating capital by linking savers and borrowers; they produce information by screening and monitoring borrowers; they create liquidity; they share and distribute risk; they engage in maturity transformation by borrowing short and lending long. What you won’t usually hear is that banks may help people stick to an optimal savings plan that they might not be able to stick to if they invested their money themselves. In other words, banks may serve as piggy banks by preventing people from ...
Working Paper
Bank performance and regional economic growth: evidence of a regional credit channel
This paper examines the relationship between bank performance and economic growth at the state level. We develop a regional credit view to explain how, due to information costs, regional banking conditions can influence local economic activity by affecting a region's ability to fund local investments. The model suggests that local banking-sector problems may constrain economic activity in financially distressed regions, whereas no such link need be evident in financially sound regions. We test the empirical relevance of this credit view for the 1983-1990 period using state-level data and find ...
Conference Paper
The impact of bank consolidation on CRA business lending
Working Paper
The role of banks in influencing regional flow of funds
A presentation of a theoretical model of regional banking using plausible information asymmetries to explain how local bank capital may affect the funding of regional investments, concluding that regional banking conditions can affect the efficiency of investment and the level of future aggregate output.
Conference Paper
Scale economies at payday loan stores
Working Paper
Loan sales as a response to market-based capital constraints
A model of bank asset sales in which information asymmetries create the incentive for unregulated banks to originate and sell loans to other banks, rather than fund them with deposit liabilities. Private information implies that bankers can fund local loans only to the extent that their capital can absorb potential losses. Loan sales are effectively a means of employing nonlocal bank capital to support local investments.