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Author:Narajabad, Borghan N. 

Working Paper
Self-fulfilling Runs: Evidence from the U.S. Life Insurance Industry

Is liquidity creation in shadow banking vulnerable to self-fulfilling runs? Investors typically decide to withdraw simultaneously, making it challenging to identify self-fulfilling runs. In this paper, we exploit the contractual structure of funding agreement-backed securities offered by U.S. life insurers to institutional investors. The contracts allow us to obtain variation in investors' expectations about other investors' actions that is plausibly orthogonal to changes in fundamentals. We find that a run on U.S. life insurers during the summer of 2007 was partly due to self-fulfilling ...
Finance and Economics Discussion Series , Paper 2015-32

Discussion Paper
The Increased Role of the Federal Home Loan Bank System in Funding Markets, Part 2 : Recent Trends and Potential Drivers

This note is the second part in a three part series. Part 1 provides some historical background and discusses key institutional characteristics of the Federal Home Loan Banks (FHLB) System. This note discusses recent trends in the FHLB system and potential drivers of those trends.
FEDS Notes , Paper 2017-10-18-2

Working Paper
Why Rent When You Can Buy?

Using a model with bilateral trades, we explain why agents prefer to rent the goods they can afford to buy. Absent bilateral trading frictions, renting has no role even with uncertainty about future valuations. With pairwise meetings, agents prefer to sell (or buy) durable goods whenever they have little doubt on the future value of the good. As uncertainty grows, renting becomes more prevalent. Pairwise matching alone is sufficient to explain why agents prefer to rent, and there is no need to introduce random matching, information asymmetries, or other market frictions.
Finance and Economics Discussion Series , Paper 2017-094

Working Paper
Robust Dynamic Optimal Taxation and Environmental Externalities

We study a dynamic stochastic general equilibrium model in which agents are concerned about model uncertainty regarding climate change. An externality from greenhouse gas emissions damages the economy's capital stock. We assume that the mapping from climate change to damages is subject to uncertainty, and we use robust control theory techniques to study efficiency and optimal policy. We obtain a sharp analytical solution for the implied environmental externality and characterize dynamic optimal taxation. A small increase in the concern about model uncertainty can cause a significant drop in ...
Finance and Economics Discussion Series , Paper 2014-75

Discussion Paper
The Increased Role of the Federal Home Loan Bank System in Funding Markets, Part 3 : Implications for Financial Stability

This note is the third part in a three part series. Part 1 provides some historical background and discusses key institutional characteristics of the Federal Home Loan Banks (FHLB) System. Part 2 highlights some of the recent trends in the FHLB system and potential drivers of those trends. This note discusses the implication of these developments for financial stability.
FEDS Notes , Paper 2017-10-18-3

Working Paper
Securities Lending as Wholesale Funding : Evidence from the U.S. Life Insurance Industry

The existing literature implicitly or explicitly assumes that securities lenders primarily respond to demand from borrowers and reinvest their cash collateral through short-term markets. Using a new dataset that matches every U.S. life insurer?s bond portfolio, as well as their lending and reinvestment decisions, to the universe of securities lending transactions, we offer compelling evidence for an alternative strategy, in which securities lending programs are used to finance a portfolio of long-dated assets. We discuss how the liquidity and maturity mismatch associated with using securities ...
Finance and Economics Discussion Series , Paper 2016-050

Working Paper
Renewable Technology Adoption Costs and Economic Growth

We develop a dynamic general equilibrium integrated assessment model that incorporates costs due to new technology adoption in renewable energy as well as externalities associated with carbon emissions and renewable technology spillovers. We use world economy data to calibrate our model and investigate the effects of the technology adoption channel on renewable energy adoption and on the optimal energy transition. Our calibrated model implies several interesting connections between technology adoption costs, the two externalities, policy, and welfare. We investigate the relative effectiveness ...
Finance and Economics Discussion Series , Paper 2022-045

Discussion Paper
The Increased Role of the Federal Home Loan Bank System in Funding Markets, Part 1: Background

The Federal Home Loan Bank (FHLB) system was founded in 1932 to support mortgage lending by thrifts and insurance companies. Over time, the system has grown into a provider of funding for a larger range of financial institutions, including commercial banks and insurance companies. Part 1 of this note provides an overview of the FHLB system. Part 2 highlights some of the recent developments in the FHLB system. And part 3 discusses the implications of these developments for financial stability.
FEDS Notes , Paper 2017-10-18-1

Discussion Paper
Assessing the Size of the Risks Posed by Life Insurers' Nontraditional Liabilities

This note discusses potential methods for assessing the size of the run risk associated with life insurers' nontraditional liabilities.
FEDS Notes , Paper 2019-05-21-3

Discussion Paper
Funding Agreement-Backed Securities in the Enhanced Financial Accounts

This note describes new data on funding agreement-backed securities (FABS) that is being provided as part of the Enhanced Financial Accounts (EFA) initiative.
FEDS Notes , Paper 2016-08-05-2

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