Housing prices are known to respond slowly and heterogeneously to macroeconomic variations from the demand and supply sides of housing. This offers a possibility to model the long memory and varied persistence of housing price adjustments, through which a refined characterisation of the macroeconomic-housing price interaction in equilibrium can be developed. Our article advances a theoretical argument, supported by empirical findings in the United States, that macroeconomic variations trigger varied reactions on housing demand and supply sides. This leads to distinct trajectories of equilibrium housing price formations governed by differential price adjustments on the two sides of housing. An established longer memory on the supply side of housing demonstrates its higher persistence of disequilibrium deviations than on the demand side. In the equilibrium, certain macroeconomic factors are found to exert dual but heterogeneous roles in housing demand- and supply-side dynamics. The net role of each such factor is negative led by its even stronger negative role on the demand side compared against a smaller positive one on the supply side. Our findings contribute to deeper reflections on the likely ineffectiveness of macroeconomic interventions in housing price dynamics.

Housing prices are known to respond slowly and heterogeneously to macroeconomic variations from the demand and supply sides of housing. This offers a possibility to model the long memory and varied persistence of housing price adjustments, through which a refined characterisation of the macroeconomic–housing price interaction in equilibrium can be developed. Our article advances a theoretical argument, supported by empirical findings in the United States, that macroeconomic variations trigger varied reactions on housing demand and supply sides. This leads to distinct trajectories of equilibrium housing price formations governed by differential price adjustments on the two sides of housing. An established longer memory on the supply side of housing demonstrates its higher persistence of disequilibrium deviations than on the demand side. In the equilibrium, certain macroeconomic factors are found to exert dual but heterogeneous roles in housing demand- and supply-side dynamics. The net role of each such factor is negative led by its even stronger negative role on the demand side compared against a smaller positive one on the supply side. Our findings contribute to deeper reflections on the likely ineffectiveness of macroeconomic interventions in housing price dynamics.

We investigate whether equity investing in fintech startups enhances banks’ own innovation and how this relationship varies across domestic and international partnerships. Using a panel of 160 banks and 772 fintech funding rounds from 2005 to 2023, we match Crunchbase deal data with trademarks and patent filings. We find that bank investments in the equity of fintech firms are associated with more bank innovation capabilities. Effects are strongest for domestic investments, consistent with information advantage. The relationship is also stronger when the target firm is fin-native (lending or payments) versus tech-native (data analytics or reg-tech). These findings suggest that strategic equity stakes may serve as a technology-sourcing channel, informing ongoing debates on bank-fintech partnerships and international diffusion of financial technology. Our findings carry significant implications for policymakers, bank executives, and entrepreneurs alike.

In this paper, we examine the role of banks’ business models on their decisions to acquire FinTech firms and how they do so. We find that banks with diverse assets, funds, and income structures are more inclined to engage in FinTech acquisitions. Investment banks display selectivity in FinTech acquisitions while wholesale and traditional banks appear more wary, possibly because of the limited need for FinTech in their business models or the externalities in their existing business models.

This paper examines the impact of the Sustainable Finance Disclosure Regulation (SFDR) on greenwashing by equity mutual funds in the EU. We propose a unique measure called the Greenwashing Index, based on a fund's decarbonisation effort relative to its flows, to quantify the level of greenwashing. Using a difference-in-differences analysis, we find that following the enactment of the SFDR, Article 9 funds experience a lower level in their greenwashing index relative to a control group of funds. However, for Article 8 funds we do not observe any significant reduction in the level of their greenwashing index relative to the same control group. We also use a regression discontinuity design (RDD) and find that the decline in the greenwashing index is more concentrated in Article 9 than in Article 8 funds which indicates a different effect of the SFDR on greenwashing behaviour between those funds. Our findings also show that Article 9 funds decarbonise their portfolios by primarily following a portfolio tilting strategy to overweight low carbon-intensive holdings following the introduction of the SFDR.

This paper examines greenwashing practices in environmental funds. We utilize a unique data set of US equity mutual fund holdings between 2012 and 2021 to calculate the funds’ carbon footprints. Using a difference-in-differences analysis, we find that, following their commitments to sustainability, environmental funds fail to reduce their carbon footprints relative to a matched group of conventional funds. We also find, using an event study, a significant increase in the flows of environmental funds in response to these commitments. The combination of the failure to reduce carbon footprints and the surge in inflows provides evidence of greenwashing by environmental funds, raising concerns about their fiduciary duty. Our findings also show that greenwashers tend to initially have low flows and high portfolio carbon emissions suggesting that they announce their commitments to sustainability just to attract investors.

We show that IRS monitoring exerts a significantly negative effect on the cost of syndicated loans. A one standard deviation increase in the probability of an IRS audit decreases loan spreads by around nine basis points. We also find that this effect is stronger for borrowers with better lending relationships and credible access to public markets. These results indicate that IRS monitoring could increase the bargaining power of borrowers and restrain banks from extracting informational rents from their lending relationships. Thus, they provide a novel insight into how IRS monitoring could lower the cost of financing from the banking system.

We propose a new measure of systemic financial distress that incorporates idiosyncratic and systemic risks in the financial system network. Using this measure, we develop an integrated stress test of bank liquidity and solvency risks based on the dynamics of financial distress within the banking system network. We apply this stress test framework to the US banking system and identify systemic vulnerability of individual banks as well as the resilience of the system as a whole to an economic shock. The framework helps us identify and monitor systemic interdependencies between banks. The proposed stress testing framework is useful for practical macroprudential monitoring and is informative for policy making.

This paper examines greenwashing practices in sustainable funds portfolios. We use an event study to examine whether sustainable funds' announcements about their commitment to decarbonization lead to abnormal flows from investors. We utilize a unique data set of US equity mutual funds and their holdings, over the period 2011-2021, to calculate the sustainable fund portfolios' carbon footprint. We find that sustainable fund flows respond positively to announcements from sustainable funds. Surprisingly, this result shows significantly positive cumulative abnormal flows in the event window, while there are significant and negative incremental abnormal flows before and after the event window. To overcome selection bias and endogeneity, we use Difference in Differences analysis to measure how much the carbon footprint of sustainable funds changes following the announcement date. These results confirm that sustainable funds fail to reduce their carbon footprint relative to conventional funds over the period that follows the announcement date. Moreover, This is consistent with the signaling theory argument. By rushing to announce the integration of sustainability criteria in the fund's prospectus, asset managers give misleading signals to investors about their commitments toward decarbonization which is considered a sign of greenwashing.

We explore how bank CEOs' cultural heritage shapes the nexus between lending relationships and the cost of bank loans in the US syndicated loans market. We show that banks led by CEOs that trace their origin in more individualistic and masculine societies are less inclined to share with their borrowers the savings stemming from strong lending relationships. In contrast, banks led by CEOs that originate from societies where uncertainty avoidance and power distance are higher, exhibit a stronger propensity to reward their relationship borrowers with lower loan prices. These findings are consistent with the view that certain cultural attributes affect the degree to which relationships are valued in the societal and business contexts. Our study highlights the importance of considering lenders' culture when investigating the effects of lending relationships on the cost of bank loans.

While credit plays an instrumental role in housing price dynamics, existing work has produced conflicting evidence of its real impact. This paper reconciles various inconclusive findings via a disaggregation strategy to decompose aggregate credit into credit-to-the-real economy (cr) and credit-to-the-asset markets (cf ). We argue that these two credit components exert theoretically expected and distinct impacts on housing prices, identified separately through a housing demand and a housing supply credit-circulation channel. Using an international panel dataset and treating for periodic cycles, our panel VAR estimations show that cr and housing prices depict a mutually reinforcing positive relationship. However, cf exerts a negative but negligible impact on housing prices in the short-run; it has a strong and positive effect in the long-run. Further, controlling for effects of economic policy uncertainty strengthens the interactions between housing prices and the two credit components. Our results are robust and suggest that close monitoring of credit allocation to housing demand and supply sides, as well as the extent of pump-priming resource allocation to the real economy, should be of interest to policymakers.

We develop a model in which margin procyclicality and the propensity for liquidity hoarding interact to generate a systemic liquidity crisis. In this model, banks lend and borrow in the interbank market to mitigate liquidity risk and trade derivatives contracts in the OTC derivatives market to mitigate market risk. The daily mark-to-market of derivatives contracts results in daily margin calls that banks cover using high quality liquid assets. We find that distress due to margin procyclicality in the derivatives market can spillover to the interbank market leading to systemic liquidity risk. Interconnectedness further amplifies the effects of systemic risk within the interbank market. The model shows that central clearing might increase the possibility of systemic liquidity risk due to tight margin requirements and the timing of cash flows required from banks. We also find that haircut levels affect the possibility of systemic liquidity risk, and highlight the potential role of a market maker of last resort in limiting this possibility.

We empirically evaluate the channels through which securitization impacts bank profitability. To this end, we analyze the role played by bank risk, cost of funding, liquidity and regulatory capital in explaining the relationship between securitization and bank profitability. We find that securitization activities tend to boost profitability. We also show that bank risk, cost of funding, liquidity and regulatory capital individually and jointly act as transmission channels in the securitization-profitability relationship. In addition, we break down the securitization effects on bank profitability into direct and indirect effects and identify the contribution of each individual transmission channel in the overall impact on bank profitability. Our findings have several implications for banks, financial markets, and regulators.

We introduce the role of 'space' in analyzing the effect of macroeconomic policy interventions on cross-country housing price movements. We build an empirically testable analytical model and test our theoretical predictions for a panel of European countries over the period 1985–2015. Our aim is to demonstrate that while macroeconomic policy exerts a significant impact on international housing markets, the magnitudes of such impacts may be overestimated in the absence of spatial frictions. To test our hypotheses, we employ a spatial dynamic panel method and quantify intra- and inter-country differences of the effects of macroeconomic policy interventions on spatially interdependent housing markets. Endogeneity issues arise in our estimation, which we ameliorate by employing the spatial Durbin model for panel data. Following this approach, we include spatial, temporal and spatio-temporal lags for the identification purpose. We show that a spatially-embedded model produces relatively smaller and correct signs for macroeconomic variables in contrast to the traditional non-spatial model. It is concluded that empirical estimates from the traditional model are consistently over-estimated. These have significant policy implications for the exact role of macroeconomic interventions in explaining housing price movements. A battery of robustness tests and evaluations of predictive performance confirm our results.

This study investigates an early warning indicator for liquidity shortages in the short‐term interbank market. To identify structural breaks and their persistence, an autoregressive two‐state regime switching model is presented. The variability in the LIBOR–OIS spread along with thresholds, which delimit four intensities, reveals regime changes consistent with liquidity crashes. The transition between the states is state dependent, and the posterior estimates for the crisis and noncrisis states are estimated using the Gibbs sampler. We forecast our early warning indicator up to December 2011 and show that the estimates are superior to a random walk with drift. Therefore, the model is an effective early warning indicator of an imminent liquidity shortage impacting the interbank market.

This paper investigates liquidity spillovers between the US and European interbank markets during turbulent and tranquil periods. We show that an endogenous model with time-varying transition probabilities is effective in describing the propagation of liquidity shocks within the interbank market, while predicting liquidity crashes characterised by changed dynamics. We show that liquidity shocks, originating from movements of the spread between the Asset Backed Commercial Paper and T-bill, drive regime changes in the euro fixed-float OIS swap rate. Our results support the idea of endogenous contagion from the US money market to the eurozone money market during the global financial crisis.

We provide new evidence about the effect of securitization on bank stability and systemic risk in the run-up to and following the global financial crisis by considering the role of the bank lending channel of monetary policy. In so doing, we use a structural model of bank stability to construct a new measure of the net effect of securitization on bank stability. Analyzing the dynamics of this measure at the individual bank and the banking system levels shows that securitization activities have a destabilizing effect on banks, although this effect decreases after the crisis. To explain this change, we then use the bank lending channel as the main link between securitization and monetary policy. We find that low monetary policy interest rates in the aftermath of the global financial crisis have mitigated the destabilizing effect of securitization on banks.

We develop a model to analyze distress spillover from the OTC interest rate swaps (IRS) market into the interbank market due to central clearing and margin requirements. We show that margin procyclicality in the OTC IRS market derived by interest rate volatility can lead to the onset of systemic liquidity shortage in the interbank market. We also show that central clearing may increase systemic liquidity risk due to tight margin requirements.