Bank Size, Returns to Scale and Cost Efficiency

Since the passage of Dodd-Frank, government regulators have become more interested than ever in the significant increase of bank size in the U.S. financial sector. To shed light on the reasons of the bank size increase and its effects on banks, we study the dynamic interactions between size, cos efficiency and returns to scale. Using Fourier flexible form, we show that banks of all but the largest sizes exhibit increasing returns to scale. As banks grow, they tend to benefit from cost efficiencies more, but they lose returns to scale gains. Banks seem to exploit increasing returns to scale until they become too large; however, they continue to enjoy their cost efficiency. We also analyze the effects of regulations in the past 25 years to understand whether imposing (or removing) limits on the size of banks causes real economic costs. Our findings show that both restrictive and loose regulation help larger banks, but hurt smaller banks by creating extra costs

Chapter 14- How Instructors Can Help Students Embrace a Growth Mindset: The Importance of Applying Theory to Practice

In today’s educational system, it is more important than ever to set students up for success in their future careers and professional development. “I really liked how the classes were more than lectures,” wrote one student in a recent course evaluation. But how can classes be more than “just” lectures? And how can a growth mindset be implemented to prepare students for their future careers? While many courses lend themselves well to teaching applicable skills, instructors assigned to theory-based courses often feel challenged to convey the importance of understanding the theory—or the usefulness of theoretical frameworks—to their students

Habits of Mind: Designing Courses for Student Success

Although content knowledge remains at the heart of college teaching and learning, forward-thinking instructors recognize that we must also provide 21st-century college students with transferable skills (sometimes called portable intellectual abilities) to prepare them for their futures (Vazquez, 2020; Ritchhart, 2015; Venezia & Jaeger, 2013; Hazard, 2012). To “grow their capacity as efficacious thinkers to navigate and thrive in the face of unprecedented change” (Costa et al., 2023), students must learn and improve important study skills and academic dispositions throughout their educational careers. If we do not focus on skills-building in college courses, students will not be prepared for the challenges that await them after they leave institutions of higher education. If students are not prepared for these postsecondary education challenges, then it is fair to say that college faculty have failed them

Costly Financial Intermediation and Excess Consumption Volatility

This paper documents the cyclical properties of financial intermediation costs and uses their dynamics to explain excess consumption volatility differences across countries in a dynamic stochastic general equilibrium (DSGE) framework. I find that financial development levels have no role in explaining excess consumption volatilities. Instead, the volatility of the financial sector plays the determinative role. The model matches the data, finding excess consumption volatility to be four times higher in an average emerging country compared to the US. This paper also shows that if the US had the same intermediation cost structure as the average emerging country, deteriorations in the production, consumption, labor market, business investment, and real estate market following a financial shock would increase sixfold, on average

Housing Wealth Reallocation Between Subprime and Prime Borrowers During Recessions

Prime borrowers are more likely to own investment homes during recessions than during recoveries, while subprime borrowers are less likely to do so. This contrasting pattern conforms with the observation that the homeownership rates of these two types of borrowers have followed opposite trends since the mid-1990s. We attribute such divergence in homeownership to the better credit access of the prime borrowers and show that this asymmetry is amplified when subprime borrowers are previously subjected to lax credit conditions and have high debt-to-value ratios. An expansionary monetary policy can bridge this gap in housing wealth