Income and substitution effects of fiscal policy on work effort

The focus of this paper is twofold. First, it examines the impact on work effort of changes in government purchases financed with lump‐sum taxes, in a neoclassical framework, with respect to four industrialised countries. Second, it reconsiders the expenditure–work effort relationship in a broader conceptual context that allows for distortionary taxation and a disaggregation of the income and substitution effects. Our findings are shown to cast doubt on the empirical plausibility of the prevailing (neoclassical and New Keynesian) models which seem to rely heavily on the lump‐sum tax notion, thus ignoring the substitution effects of distortionary taxation.     

The Tin Crisis (1985-86) and Futures Trading

A succession of six international tin agreements operated from 1956 to 1985. Futures trading in tin continued in London until the buffer stock scheme, without cash or the support of its sponsoring governments, collapsed in October 1985. The implications of the tin experience for futures trading and for so-called commodity stabilization schemes are examined     

Re‐Use of Collateral in the Repo Market

This paper introduces a methodology to estimate the re‐use of collateral based on actual transaction data. With a comprehensive data set from the Swiss franc repo market we are able to provide the first systematic study on the re‐use of collateral. We find that re‐using collateral was most popular prior to the financial crisis when roughly 10% of the outstanding interbank volume was secured with re‐used collateral. Furthermore, we show that the re‐use of collateral increases with the scarcity of collateral. By giving an estimate of the collateral re‐use and explaining its drivers, the paper contributes to the on‐going debate on collateral availability.     

Model Secrecy and Stress Tests

Should regulators reveal the models they use to stress-test banks? In our setting, revealing leads to gaming, but secrecy can induce banks to underinvest in socially desirable assets for fear of failing the test. We show that although the regulator can solve this underinvestment problem by making the test easier, some disclosure may still be optimal (e.g., if banks have high appetite for risk or if capital shortfalls are not very costly). Cutoff rules are optimal within monotone disclosure rules, but more generally optimal disclosure is single-peaked. We discuss policy implications and offer applications beyond stress tests.