with Òscar Jordà, Björn Richter and Alan M. Taylor. Higher capital ratios are unlikely to prevent a financial crisis. This is empirically true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between countries. We reach this startling conclusion using newly collected […]

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The effects of quasi-random monetary experiments

with Òscar Jordà and Alan M. Taylor. The trilemma of international finance entails that fluctuations in interest rates—for countries with fixed exchange rates that allow unfettered cross-border capital flows—are mostly due to international arbitrage. Consequently, we can locate a valid source of exogenous variation to identify monetary policy effects with instrumental variable methods. Paired with […]

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Government debt: causes, effects and limits

with Carl-Ludwig Holtfrerich, Lars P. Feld, Werner Heun, Gerhard Illing, Gebhard Kirchgässner, Jürgen Kocka, Wolfgang Streeck, Uwe Wagschal, Stefanie Walter, Carl Christian von Weizsäcker. The Coordinating Committee of the National Academy of Sciences Leopoldina approved the establishment and funding of an interdisciplinary working group on government debt in the fall of 2011. The subject has […]

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with Yao Chen. External adjustment under the Gold Standard – a fixed exchange rate regime – was associated with few, if any, output costs. This paper evaluates how flexible prices, international migration, and monetary policy contributed to this benign adjustment experience. For this purpose, we build and estimate an open economy model for the Gold […]

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with Oscar Jordà and Alan M. Taylor — NBER Macroeconomics Annual, Vol. 31. In advanced economies, a century-long near-stable ratio of credit to GDP gave way to rapid financialization and surging leverage in the last forty years. This “financial hockey stick” coincides with shifts in foundational macroeconomic relationships beyond the widely-noted return of macroeconomic fragility […]

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with Manual Funke and Christoph Trebesch — European Economic Review, forthcoming. Partisan conflict and policy uncertainty are frequently invoked as factors contributing to slow post-crisis recoveries. Recent events in Europe provide ample evidence that the political aftershocks of financial crises can be severe. In this paper we study the political fall‐out from systemic financial crises […]

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Leveraged Bubbles

with Oscar Jorda and Alan Taylor — Journal of Monetary Economics, Vol. 76, pages S1-S20. What risks do asset price bubbles pose for the economy? This paper studies bubbles in housing and equity markets in 17 countries over the past 140 years. History shows that not all bubbles are alike. Some have enormous costs for […]

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