The Value of Central Bank Liquidity During a Pandemic

The global spread of COVID-19 has triggered large disruptions in financial markets. In response, central banks, such as the Federal Reserve, have created and continue to run a range of facilities to improve liquidity in financial markets, with the goal of promoting economic recovery. How effective are these facilities during a pandemic? In this blog […]

Shadow Banking in China Compared to Other Countries

China’s shadow banking sector has grown rapidly in the last decade. While bank loans still dominate the financial system as a main source of funding, the shadow banking sector reached 32.9 percent of total social financing by 2016, though it then fell to 24.2% percent by 2019. Households and corporations benefit from the growing shadow […]

Macroprodential objectives and challenges

Microprudential regulation aims to prevent the government from being faced with a choice between spending taxpayer money to bailout an insolvent financial institution or suffering a financial and economic collapse. Banking collapses are so costly that it is difficult to resist bailouts when they happen. But the expectation of bailouts generates moral hazard, stoking leverage […]

Institutional Diversity and Bank Stability – Evidence from European Countries

The COVID-19 crisis is a reminder that resilient and powerful financial and banking systems are essential. In EU member states, the banking sector is the most important part of the financial system and the central source of finance for small and medium enterprises (SMEs), which make up around 99 percent of all EU companies. The […]

In Defense of Naked Credit Default Swaps

A credit default swap (CDS) is a credit derivative that shields protection buyers from the credit risks specified in the contract.[1] CDS has acquired public notoriety in the wake of the Global Financial Crisis and the European Debt Crisis.[2] On September 15, 2008, the $180 billion bailout of AIG thrust CDS into the spotlight for […]

Financial Contagion during the COVID-19 pandemic

Financial contagion is traditionally defined as a situation in which a shock that initially affects only a few financial institutions spreads, or spills over, to the rest of the financial system and the economy, subsequently infecting the financial systems and economies of other countries. Because of its clear importance to the global economy, this phenomenon […]

The ECB that the EU Deserves and the One It Needs Now: Thoughts on the German Constitutional Court’s Ruling on the Public Sector Purchase Programme

Courtesy of Pietro Fazzini and Federico Urbani The German Constitutional Court’s Ruling on the PSPP: An Introduction The already fragile political stability of the European Union has been radically shaken by the adoption of the long-awaited and disruptive ruling from the Second Senate of the German Constitutional Court (Bundesverfassungsgericht or GCC) on the validity of […]

The Effect of Foreign Competition on Corporate Tax Avoidance

Courtesy of Nader Atawnah, Balasingham Balachandran, Huu Nhan Duong, Jeffrey Pittman, and Edward Podolski The US Federal government deficit totaled $984 billion in 2019, representing 4.7% of GDP. Aggressive tax evasion and avoidance strategies by corporations are one contributing factor to this shortfall. By some accounts, profit shifting and tax evasion strategies reduce the IRS’s […]

The Death of Trust Across the Finance Industry

Courtesy of Peter Limbach, P. Raghavendra Rau, and Henrik Schürmann The financial sector plays a crucial role in a country’s economic development. For example, better developed financial systems are associated with faster economic growth, increased levels of technological innovation, and reduced poverty. A well-functioning financial system depends on the reliability of contracts and contractors. This […]

Theorizing Transnational Fiduciary Law

Courtesy of Seth Davis & Gregory Shaffer What do asset protection trusts in the Cook Islands and Alaska, the UN Environment Program’s “Fiduciary Duty for the 21st Century” report, and the Mitsubishi UFJ Trust and Banking Corporation have in common? They are all examples of transnational fiduciary law.[1] Fiduciary law is a global phenomenon. It […]