Jordan Schoenfeld, 05 May 2020

Are pandemics systemically important to modern-day financial markets? It is not obvious how a financial market’s myriad interconnected parts would react to a pandemic-induced supply and demand shock. This column shows that the COVID-19 pandemic triggered unprecedented changes in employment levels and the values of stocks, bonds, commodities, and currencies. Corporate managers also systematically underestimated their business-model exposure to pandemics in their annual report risk factors.

Signe Krogstrup, Cédric Tille, 29 August 2018

Volatility in international capital flows can disrupt international trade and finance. This column explores the role of agents’ exposure to risk in this dynamic, focusing on domestic financial firms. It finds that the impact of an increase in risk aversion on foreign currency funding is conditional on the bank’s initial net currency exposure. This suggests that the empirical link from global factors to cross-border bank funding depends on country-specific characteristics of financial institutions.

Stephen Cecchetti, Kim Schoenholtz, 03 December 2017

The Global Crisis dramatically revealed the severity of ignorance about risk exposure in the global financial system. A major issue is the complexity of legal structures with webs of subsidiaries and a lack of consolidated information systems. This column describes efforts to address these failings through the launching of a global legal entity identifier. The initiative offers great promise for addressing the complex information problems. However, network externalities imply that its success will depend on participation and adoption incentives.

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