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Insights / Research BriefMar 02, 2022

Information versus Investment

Stephen J. Terry, Toni M. Whited, Anastasia A. Zakolyukina
When Enron, a Texas-based energy trader and supplier, filed for bankruptcy in December 2001, its stock was trading at $0.26 per share. The prior year its share price peaked at $90.75. This stunning fall was not the result of economic shocks or events out of Enron’s control.
Topics:  Financial Markets
Insights / Research BriefOct 21, 2021

Community Membership and Reciprocity in Lending: Evidence from Informal Markets

Rimmy Tomy, Regina Wittenberg-Moerman
Imagine that you are a wholesale provider of textiles to retailers who sell their wares in a large bazaar in one of many communities across India. As a wholesaler, you receive your inventory from a large supplier in say, Mumbai or Delhi. It’s a challenging business; margins are thin, and your livelihood depends on your retailers’ success. At the same time, retailers often do not have enough money to purchase your wares and, therefore, you need to provide credit. To whom do you lend? In an informal market that is absent balance sheets and sales data, who do you trust? Where do you get your information?
Topics:  Financial Markets
Insights / Research BriefOct 15, 2019

Policy Uncertainty in Japan

In the aftermath of the Financial Crisis (2007-08) and the Great Recession (2007-09), households and firms faced lots of uncertainty, not only about when and how the economy would recover, but also confusion on whether and how the administration, Congress, and the Federal Reserve would react. For families considering the purchase of a new car or a move to another city for a job, and for businesses considering new hires or a plant expansion, this policy uncertainty meant that the prudent choice was often wait-and-see.
Topics:  Financial Markets, Monetary Policy
Insights / Research BriefMay 14, 2019

Low Interest Rates, Market Power, and Productivity Growth

In the aftermath of the Financial Crisis and Great Recession of 2007-09, one explanation for the US economy’s low-level growth rate was a depression-era idea known as “secular stagnation,” which posits that such factors as persistent and very low interest rates, and/or wages and prices that remain at consistent levels, weigh down the economy’s growth rate. Interest rates near zero cannot be lowered further to incent borrowing and spending, and without such fuel for the economy, wages and prices become stagnant, or “sticky.” Growth remains sluggish.
Topics:  Financial Markets
Insights / Research BriefFeb 06, 2019

IQ, Expectations, and Choice and Human Frictions in the Transmission of Economic Policy

In the months and years following the Financial Crisis and Great Recession of 2007-09, the Federal Reserve and the European Central Bank engaged in a number of unconventional policy measures meant to forestall a further drop in economic activity and, ultimately, to ignite economic growth. One of those measures, forward guidance, was intended to stimulate current consumption by informing the public that interest rates would be kept inordinately low for an extended period and hence increasing their inflation expectations.
Topics:  Monetary Policy, Financial Markets, K-12 Education, Higher Education & Workforce Training
Insights / Research BriefJun 01, 2018

The Glass Ceiling

Since roughly 1955, women born every year in America were more likely to earn a college degree than men. At first the gap between men and women was narrow, but by 1970 it had widened considerably and has continued to expand over time. Indeed, the percent of women attaining a college degree continued to increase through the 1985 birth cohort while the percent of men holding a degree has actually declined since 1970. (See Figure 1.) What this means is that of all the women born in America in 1985, roughly 40 percent hold college degrees today, while just under 30 percent of men born in 1985 have a college degree.
Topics:  Employment & Wages, Financial Markets
Insights / Research BriefJun 01, 2018

Redistribution through Markets

Piotr Dworczak, Scott Kominers, Mohammad Akbarpour
In many markets, sellers are poorer than buyers. Rideshare drivers, for example, often have far lower incomes than their riders do. Renters are typically poorer than property owners. How should we structure such markets? Standard economic intuition suggests that they’re no different from other settings – the best thing to do is just to set the market-clearing price. But a new BFI Working Paper by Piotr Dworczak, a current Chicago Research Fellow at the Becker Friedman Institute, and two former Chicago Research Fellows – Scott Duke Kominers of Harvard and Mohammad Akbarpour of Stanford – suggests that might not always be the right choice.
Topics:  Financial Markets
Insights / Research BriefMay 01, 2018

International Currencies and Capital Allocation

Brent Neiman
If you are a small or mid-sized business in Canada and want to borrow from investors in Germany, it might be difficult to do so with bonds denominated in Canadian dollars, your home currency. It’d be a lot easier if you had a pretty sophisticated corporate treasurer’s office and paid various banking fees to hedge currency exposures. You could then issue your bonds to the German investors in eurodenominated debt.
Topics:  Financial Markets