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Working Paper
The Effects of Competition in Consumer Credit Markets
Using changes in financial regulation that create exogenous entry in some consumer credit markets, we find that increased competition induces banks to become more specialized and efficient, while deposit rates increase and borrowing costs for riskier collateral decline. However, shadow banks change their credit policy when faced with more competition and aggressively expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the form of intermediation can shape economic fluctuations. They also suggest that increased competition can ...
Journal Article
Measuring Cov-Lite Right
More business loans today lack traditional covenants governing borrowers. Does that leave banks with fewer tools to ward off default?
Working Paper
Concentration of Control Rights in Leveraged Loan Syndicates
We ?nd that corporate loan contracts frequently concentrate control rights with a subset of lenders. Despite the rise in term loans without ?nancial covenants?so-called covenant-lite loans?borrowing ?rms? revolving lines of credit almost always retain traditional ?nancial covenants. This split structure gives revolving lenders the exclusive right and ability to monitor and to renegotiate the ?nancial covenants, and we con?rm that loans with split control rights are still subject to the discipline of ?nancial covenants. We provide evidence that split control rights are designed to mitigate ...
Journal Article
Banking Trends: Do Stress Tests Reduce Credit Growth?
Stress tests are supposed to ensure your access to credit during the next downturn, but some critics claim that they also limit your access to credit today. We test that theory.
Journal Article
Banking Trends: Measuring Cov-Lite Right
More business loans today lack traditional covenants governing borrowers. Does that leave banks with fewer tools to ward off default?
Working Paper
The Impact of Unconventional Monetary Policy on Firm Financing Constraints : Evidence from the Maturity Extension Program
This paper investigates the impact of unconventional monetary policy on firm financial constraints. It focuses on the Federal Reserve?s maturity extension program (MEP), intended to lower longer-term rates and flatten the yield curve by reducing the supply of long-term government debt. Consistent with those models that emphasize bond market segmentation and limits to arbitrage, around the MEP?s announcement, stock prices rose most sharply for those firms that are more dependent on longer-term debt. These firms also issued more long-term debt during the MEP and expanded employment and ...
Journal Article
Banking Trends: Where Depositors Fear to Tread
What should policymakers do when depositors flee banks? Edison Yu shows that much depends on how banks create liquidity.
Journal Article
Banking Trends: Discrimination in Mortgage Markets
Automated underwriting may reduce but likely does not end discrimination against racial minorities.
Journal Article
Banking Trends: Where Depositors Fear to Tread
What should policymakers do when depositors flee banks? Edison Yu shows that much depends on how banks create liquidity.
Working Paper
Measuring Climate Transition Risk at the Regional Level with an Application to Community Banks
We develop a measure of climate transition risk for regional economies in the U.S., based on the mix of firms that produce emissions in each region. To quantify transition risks, we consider the introduction of an emissions tax levied on companies emitting greenhouse gases and estimate changes in the market values of industries due to a carbon tax using Merton’s (1974) model. We find that transition risks are highly concentrated in a few sectors and counties with heavy exposures to transition-sensitive sectors. The size and geographic concentration of the tax effects depend significantly on ...