Working Papers

Bank balance sheet lending is commonly viewed as the predominant form of lending. We document and study two margins of adjustment that are usually absent from this view using microdata in the$10 trillion U.S. residential mortgage market. We first…

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 dealer balance…

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 determination,…

This paper shows that stable net-interest margins of banks are uninformative about banks’ interest rate exposure. We show that neither deposits nor market power are essential for achieving stable net-interest margins (NIM) in long-short fixed…

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 closed to…

We introduce a framework for calibrating machine learning models so that their predictions satisfy explicit, finite-sample statistical guarantees. Our calibration algorithm works with any underlying model and (unknown) data-generating…

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 U.S. federal…

We study how investment fees vary within private-capital funds. Net-of-fee return clustering suggests that most funds have two tiers of fees, and we decompose differences across tiers into both management and performance-based fees. Managers of…

The modern financial system features complicated financial intermediation chains, with each layer performing a certain degree of credit/maturity transformation. We develop a dynamic model in which an entrepreneur borrows from overlapping-…

This paper studies the connection between share pledging and entrepreneurial activities in China, challenging the common wisdom that share pledging funds circle back to the listed firms. Share pledging funds are at the discretion of the…

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, investment…

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 records that link…

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 conscious capital, (…

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 government surpluses.…

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 credit market…

Women are less financially literate than men. It is unclear whether this gap reflects a lack of knowledge or, rather, a lack of confidence. Our survey experiment shows that women tend to disproportionately respond “do not know” to questions…

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 investors and borrowers…

Financial wealth inequality and long-term real interest rates track each other closely over the post-war period. Faced with lower returns on financial wealth, households with high levels of financial wealth must increase savings to afford the…

We use granular data covering regulated (brokerage-financed) and unregulated (shadow-financed) margin trading during the 2015 market turmoil in China to provide the first systematic analysis of margin investors’ characteristics, leverage…

Using MBA textbook finance, we look at three simple examples to illustrate why the r-g measure of the fiscal cost of deficits is incomplete. We start by considering the case of risky government debt. Second, we consider the case of risk-free debt…