Of AI bubbles and crashes
Warnings of an AI stock market bubble abound. Should investors and policymakers be concerned? This column argues that innovation-driven bubbles can...
Talk and the City: How Far to Trust Bankers (Not) Calling for Bailouts?
To evaluate a bank’s resilience to financial stress, authorities often rely on private information from a peer institution, or counterparty. This...
Artificial intelligence and financial crises
The rapid adoption of artificial intelligence (AI) poses new and poorly understood threats to financial stability. We use a game-theoretic model to...
How central banks can meet the financial stability challenges arising from artificial intelligence
The growing use of artificial intelligence (AI) poses difficult challenges for the financial authorities. AI allows private-sector firms to optimise...
Five systemic threats and what to do about them
Systemic financial risk has both internal and external drivers. So, when we focus too strongly on preventing internal crises, such as the 2008 Global...
Financial instability transition under heterogeneous investments and portfolio diversification
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect...
India’s Unified Payments Interface (UPI) system and its transformative impact on the economy
India’s Unified Payment Interface (UPI) is an example of how an innovative payments and settlement system can initiate an economy wide transformation...
Artificial intelligence and stability
Financial institutions are rapidly embracing AI – but at what cost to financial stability? This column argues that AI introduces novel stability risks...
The one-in-a-thousand-day problem
Financial crises usually inflict the most damage when banks suddenly shift from pursuing profits to survival. This column argues that such drastic...
Phase transitions in debt recycling
Debt recycling is an aggressive equity extraction strategy that potentially permits faster repayment of a mortgage. While equity progressively builds...
Research highlight
Unbundling Quantitative Easing: Taking a Cue from Treasury Auctions
Journal of Political Economy, 132 (9), 3115-3172
Credibility, trust, and perception of authorities’ performance
The credibility of an institution is, almost, synonymous with how well it is trusted. This column uses survey data to examine how trust in various...
Latent fragility: Conditioning banks' joint probability of default on the financial cycle
Journal of International Money and Finance, 146, 103107
How the financial authorities can respond to AI threats to financial stability
Artificial intelligence can act to either stabilise the financial system or to increase the frequency and severity of financial crises. This second...
