An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy

This paper develops a model of bank asset and liability management, based on the idea that information problems make it difficult for banks to raise funds with instruments other than insured deposits. The model can be used to address the question of how monetary policy works. One effect it captures is that when the Fed reduces reserves, this tightens banks' financing constraints and thereby leads to a cutback in bank lending -- this is the 'bank lending channel' in action. However, in addition to providing a specific set of microfoundations for the lending channel, the model also yields a novel account of how monetary policy affects bond-market interest rates.

Commentary on "Rebalancing the three pillars of Basel II."

This paper was part of the conference "Beyond Pillar 3 in International Banking Regulation: Disclosure and Market Discipline of Financial Firms," cosponsored by the Federal Reserve Bank of New York and the Jerome A. Chazen Institute of International Business at Columbia Business School, October 2-3, 2003.Bank supervision ; Bank capital ; Banking law

Waves of Creative Destruction: Customer Bases and the Dynamics of Innovation

This paper develops a model of repeated innovation with knowledge spillovers. The model's novel feature is that firms compete on two dimensions: 1) product quality or cost, where one firm's innovation ultimately spills over to other firms; and 2) distribution costs, where there are no spillovers across firms and where incumbent firms' existing customer bases give them a competitive advantage over would- be entrants. Customer bases have two important consequences: 1) they can in some circumstances dramatically reduce the long-run average level of innovation; 2) they lead to endogenous bunching, or waves, in innovative activity.

Measuring stochastic gravitational-wave energy beyond general relativity

Gravity theories beyond general relativity (GR) can change the properties of gravitational waves: their polarizations, dispersion, speed, and, importantly, energy content are all heavily theory- dependent. All these corrections can potentially be probed by measuring the stochastic gravitational- wave background. However, most existing treatments of this background beyond GR overlook modifications to the energy carried by gravitational waves, or rely on GR assumptions that are invalid in other theories. This may lead to mistranslation between the observable cross-correlation of detector outputs and gravitational-wave energy density, and thus to errors when deriving observational constraints on theories. In this article, we lay out a generic formalism for stochastic gravitational- wave searches, applicable to a large family of theories beyond GR. We explicitly state the (often tacit) assumptions that go into these searches, evaluating their generic applicability, or lack thereof. Examples of problematic assumptions are: statistical independence of linear polarization amplitudes; which polarizations satisfy equipartition; and which polarizations have well-defined phase velocities. We also show how to correctly infer the value of the stochastic energy density in the context of any given theory. We demonstrate with specific theories in which some of the traditional assumptions break down: Chern-Simons gravity, scalar-tensor theory, and Fierz-Pauli massive gravity. In each theory, we show how to properly include the beyond-GR corrections, and how to interpret observational results.Comment: 18 pages (plus appendices), 1 figur

Are There Incongruent Ground States in 2D Edwards-Anderson Spin Glasses?

We present a detailed proof of a previously announced result (C.M. Newman and D.L. Stein, Phys. Rev. Lett. v. 84, pp. 3966--3969 (2000)) supporting the absence of multiple (incongruent) ground state pairs for 2D Edwards-Anderson spin glasses (with zero external field and, e.g., Gaussian couplings): if two ground state pairs (chosen from metastates with, e.g., periodic boundary conditions) on the infinite square lattice are distinct, then the dual bonds where they differ form a single doubly-infinite, positive-density domain wall. It is an open problem to prove that such a situation cannot occur (or else to show --- much less likely in our opinion --- that it indeed does happen) in these models. Our proof involves an analysis of how (infinite-volume) ground states change as (finitely many) couplings vary, which leads us to a notion of zero-temperature excitation metastates, that may be of independent interest.Comment: 18 pages (LaTeX); 1 figure; minor revisions; to appear in Commun. Math. Phy