Destabilizing carry trades

We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supplying excessive capital to a target economy. The interest-rate differential between their funding currency and the target currency is their coordination device. We solve for a unique equilibrium that exhibits the classic pattern of the carry-trade recipient currency appreciating for extended periods, punctuated by sharp falls

Learning by Holding and Liquidity

A number of assets do not trade publicly but are sold to a restricted group of investors who subsequently receive private information from the issuers. Thus, the holders of such privately placed assets learn more quickly about their assets than other agents. This paper studies the pricing implications of this “learning by holding”. In an economy in which investors are price takers and risk-neutral, and absent any insider trading or other transaction costs, we show that risky assets command an excess expected return over safe assets in the presence of learning by holding. This is reminiscent of the “credit spread puzzle”—the large spread between BBB-rated and AAA-rated corporate bonds that is not explained by historical defaults, risk aversion, or trading frictions. The intuition is that the seller of a risky bond needs to offer a “coordination premium” that helps potential buyers overcome their fear of future illiquidity. Absent this premium, this fear could become self-justified in the presence of learning by holding because a future lemons problem deters current market participation, and this in turn vindicates the fear of a future lemons proble

De l'infâme rumeur à la polémique d'État : sur la politique de Benoît XV, typologie argumentative

Titre du fascicule : Guerres et paix : débats, combats, polémiquesDans un cadre dialogal et dans une perspective typologique générale, les arguments polémiques d'une controverse exemplaire entre Canet et Le Floch (1918-1919) sur l'attitude du Vatican durant la guerre sont passés en revue. On dénombre les lieux rhétoriques mais aussi des stratégies encore peu répertoriées et étudiées, fortement liées aux situations argumentatives et aux valeurs fondant les arguments. Version disponible sur Internet : [ http://mots.revues.org/index2523.html

Fair value accounting and financial stability.

Market prices give timely signals that can aid decision making. However, in the presence of distorted incentives and illiquid markets, there are other less benign effects that inject artifi cial volatility to prices that distorts real decisions. In a world of marking-to-market, asset price changes show up immediately on the balance sheets of financial intermediaries and elicit responses from them. Banks and other intermediaries have always responded to changes in economic environment, but marking-to-market sharpens and synchronises their responses, adding impetus to the feedback effects in financial markets. For junior assets trading in liquid markets (such as traded stocks), marking-to-market is superior to historical cost in terms of the trade-offs. But for senior, long-lived and illiquid assets and liabilities (such as bank loans and insurance liabilities), the harm caused by distortions can outweigh the benefi ts. We review the competing effects and weigh the arguments.

Marking to Market, Liquidity, and Financial Stability

This paper explores the financial stability implications of mark-to-market accounting, in particular its tendency to amplify financial cycles and the "reach for yield." Market prices play a dual role. Not only do they serve as a signal of the underlying fundamentals and the actions taken by market participants, they also serve a certification role and thereby influence these actions. When actions affect prices, and prices affect actions, the loop thus created can generate amplified responses--both in creating bubble-like booms in asset prices, and also in magnifying distress episodes in downturns.

Algorithmic accountability in scholarship: what we can learn from #DeleteAcademiaEdu

The controversy surrounding Academia.edu highlights the flaws and limitations of existing scholarly infrastructures. Jean-Christophe Plantin explores the intersection of algorithms, academic research and platforms for scholarly publications. He argues that there is a need to develop a values-centred approach in the development of article-sharing platforms, with suitably designed algorithms