New paper in JEEA

Our paper ” Holes in the Dike: The Global Savings Glut, U.S. House Prices and the Long Shadow of Banking Deregulation” (with Iryna Stewen) has now been accepted for publication in the Journal of the European Economic Association. In the paper, we argue that capital inflows into the U.S. greatly contributed to the housing boom in the years prior to the financial crisis. States that liberalized their banking markets earlier saw bigger run-ups in house prices (and larger busts). The reason for this was the treacherous assumption, that geographically diversified banks should be allowed higher leverage (as would be implied by Value-at-risk models of bank risk management). States that liberalized their banking markets earlier had a stronger presence of geographically diversified banks by the time the savings glut started to hit the U.S. from the mid-1990s onwards. As we show, […]

Shocks and risk sharing in the EMU: Lessons for Banking and Capital Market Union

A short policy piece by Mathias Hoffmann and his co-authors Bent Sorensen, Egor Maslov and Iryna Stewen on how to ensure that risk sharing in EMU  becomes resilient to systemic banking shocks has just appeared in a new CEPR e-book edited by my colleagues Jan-Egbert Sturm and Nauro Campos entitled Bretton Woods, Brussels, and Beyond: Redesigning the Institutions of Europe In this piece we build on some of our earlier and on ongoing current research to compare the state of banking integration  in the EMU today to that in the U.S. prior to state-level banking deregulation in the 1980s. As in the U.S. then, EMU today is essentially an integrated interbank market. But— as was the case among states in the U.S. prior to 1980— there is little direct cross-border lending of banks to firms or cross-border branching in the […]