Short Sellers and Politically Motivated Bad News Hoarding

Short selling has been viewed as a market mechanism that can potentially disincentivize firms’ opportunistic behaviors such as negative information suppression, as short sellers take actions when they detect the hidden bad news. Extant studies have provided evidence that short selling can help deter management from suppressing negative information in developed economies. However, in emerging […]

Insurance as a Critical Tool for Financial Stability in the Anthropocene: A Caribbean Perspective

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]

How Financial Intermediation Costs Affect Climate Policy

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]

The Economic Costs and Opportunities in Addressing Climate Change

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]

To Impose or Not to Impose—The Dilemma of Negative Interest Rates and the Rise of Bankocracy

As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT.” Big numbers! –Donald Trump   On June 10, 2020, the U.S. Federal Reserve (‘the Fed’) voted to keep interest rates near zero in the wake of the COVID-19 pandemic and hinted that rates will remain unchanged […]

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 […]