Partial Regulation in Vertically Differentiated Industries

We provide theoretical foundations for quality‐adjusted price‐cap regulation in industries where a regulated incumbent and an unregulated entrant offer vertically differentiated products competing in price and quality. We show that, whether or not the incumbent anticipates the reaction of the entrant, the optimal weights in the cap depend upon the market served by the entrant, despite the latter not being directly concerned by regulation. We further show that the cap is robust to small errors in the weights. Our findings point to the conclusion that, in partially regulated industries, regulators should use information about the whole sectors rather than on the sole regulated incumbents.     

与马塞尔·德萨马(Macel Dzama)的对话

"……隐藏地越多,显露地越多。秘密是个人的,总有东西可以发现。"杰拉德·马特和安吉拉·蒂芙:你最近出的这本《移动的画》的封面上,有一个作品使人联想到杜尚1926年创作的《艾华士光盘螺线》Discs-Avec-Spirales)。杜尚的《回旋浮雕》经常在你的作品中以拼贴画或者其它稍有改动的形式出现。杜尚或者超现实主义对你的作品有何影响?     

The Case for Bailing Out the Debtors

In the last issue of the JEA Professor Karl Brunner and five American colleagues agreed that debtor nations that refuse to adopt policies to encourage domestic growth should be allowed to go bankrupt. Angela Coolican suggests that, so severe would be the effects on world trade and financial markets, a policy of default should be considered only in the most desperate of circumstances.     

Monetary Policy and the Asset Risk‐Taking Channel

How important is the risk‐taking channel for monetary policy? To answer this question, we develop and estimate a quantitative monetary DSGE model where banks choose excessively risky investments, due to an agency problem that distorts banks' incentives. As the real interest rate declines, these distortions become more important and excessive risk taking increases, lowering the efficiency of investment. We show theoretically that this novel transmission channel generates a new monetary policy trade‐off between inflation and real interest rate stabilization, whereby the central bank may prefer to tolerate greater inflation volatility in order to lower excessive risk taking.     

Negative Monetary Policy Rates and Systemic Banks' Risk-Taking: Evidence from the Euro Area Securities Register

We show that negative monetary policy rates induce systemic banks to reach-for-yield. For identification, we exploit the introduction of negative deposit rates by the European Central Bank in June 2014 and a novel securities register for the 26 largest euro area banking groups. Banks with more customer deposits are negatively affected by negative rates, as they do not pass negative rates to retail customers, in turn investing more in securities, especially in those yielding higher returns. Effects are stronger for less capitalized banks, private-sector (financial and nonfinancial) securities and dollar-denominated securities. Affected banks also take higher risk in loans.     

The Changing International Transmission of Financial Shocks: Evidence from a Classical Time‐Varying FAVAR

We study the changing international transmission of financial shocks over the period 1971–2012. Global financial shocks are measured as unexpected changes of a U.S. financial conditions index (FCI), developed by Hatzius et al. (2010). We model the FCI jointly with a large international data set through a time‐varying parameter factor‐augmented VAR and find that financial shocks have a considerable impact on growth in the nine countries considered. Moreover, financial shocks during the global financial crisis are found to be large by historical standards. They explain approximately 20% of GDP growth variation on average over 2008–9, compared to an average of 5% prior to the crisis.     

Potential and Pitfalls of Applying Theory to the Practice of Financial Education

Researchers are increasingly using interdisciplinary theory to bring rigor to the practice of financial education. Practitioners often do not see the value of the theory because it does not coincide with their observations of how people behave, and researchers do not yet have enough experience with interdisciplinary theory to demonstrate its usefulness to practitioners. If carefully applied, theory can be used to set appropriate financial goals and to positively change consumers’ financial behaviors. Better communication can bridge the gap between theory and practice to the benefit of the consumer.