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SSRN Research Paper Series
The Social Science Research Network’s Research Paper Series includes working papers produced by Stanford GSB the Rock Center.
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We document regime change in the U.S. Treasury market post-Global Financial Crisis (GFC): dealers switched from a net short to a net long position in the Treasury market. We first derive bounds on Treasury yields that account for…
We study three centuries of UK fiscal history. Before World War I, when the UK dominated global bond markets, the UK’s government debt was not always fully backed by its future surpluses. As predicted by theories of safe asset…
We empirically characterize how China is internationalizing the Renminbi by selectively opening up its domestic bond market and propose a dynamic reputation model to explain China’s internationalization strategy. While previously…
Since 1980, foreign investors have timed their purchases and sales of U.S. Treasurys to yield particularly low returns. Their annual dollar-weighted returns, measured by IRRs, are around 3% lower than a buy-and-hold strategy over…
We use discounted cash flow analysis to measure a country’s fiscal capacity. Crucially, the discount rate applied to projected cash flows includes a GDP risk premium. We apply our valuation method to the CBO’s projections for the…
We introduce convenience yields on dollar bonds into an incomplete-markets equilibrium model of exchange rates and interest rates. The convenience yield enters as a stochastic wedge in the Euler equation for exchange rate…
This paper studies corporate venture capital (CVC) units of large US corporations to learn how they make decisions across several areas: internal organization of CVC units, relationships with parent companies, CVC unit objectives…
We develop a model of financial crises with both a financial amplification mechanism, via frictional intermediation, and a role for sentiment, via time-varying beliefs about an illiquidity state. We confront the model with data on…
This paper studies the optimal design of corporate taxes when firms have private information about future investment opportunities and face financial constraints. A government whose goal is to efficiently raise a given amount of…
I study the first modern global banking crisis that began in London in 1866 and provide causal evidence that financial sector disruptions can reshape international trade patterns for decades. Using newly collected archival loan…
Violations of no-arbitrage conditions measure the shadow cost of intermediary constraints. Intermediary asset pricing and intertemporal hedging together imply that the risk of these constraints tightening is priced. We describe a…
We evaluate the quantitative effect of ESG divestitures on the cost of capital of affected firms. We derive a simple expression for the change in the cost of capital as a function of three inputs: (1) the fraction of socially…
How can we assess whether macro-prudential regulations are having their intended effects? If these regulations are optimal, their marginal benefit of addressing externalities should equal their marginal cost of distorting risk-…
Decisions take time, and the time taken to reach a decision is likely to be informative about the cost of more precise judgments. We formalize this insight in the context of a dynamic model of optimal evidence accumulation. We…
We develop a model of the global financial cycle with one key ingredient: the demand for safe dollar assets. The model matches patterns of dollar borrowing and currency mismatch, the U.S. external balance sheet, low U.S. interest…
The Federal Reserve’s “balance-sheet normalization,” which reduced aggregate reserves between 2017 and September 2019, increased repo rate distortions, the severity of rate spikes, and intraday payment timing stresses, culminating…
This paper analyzes bond convenience yields in a currency union. The intertemporal government budget constraint requires member countries’ bond convenience yields and default spreads to adjust in response to shocks to their…
We show that lenders face more uncertainty when assessing default risk of historically under-served groups in US credit markets and that this information disparity is a quantitatively important driver of inefficient and unequal…
This paper analyzes non-fundamental volatility and efficiency in a class of large games (including e.g. linear-quadratic beauty contests) that feature strategic interaction and endogenous information acquisition. We adopt the…
Cross-border capital flows are often opaque. Global firms commonly finance themselves through foreign subsidiaries, including shell companies in tax havens, making it difficult to observe the true economic linkages between…