[cid:image002.png@01CEBF6B.D0B28790] VIENNA JOINT ECONOMICS SEMINAR INVITATION The University of Vienna and the Department of Economics and Finance at the Institute for Advanced Studies cordially invite you to the following Vienna Joint Economics Seminar <http://www.ihs.ac.at/vienna/resources/Economics/Papers/20130226_Paper_Zimmermann.pdf> Thursday, April 16, 2015 University of Vienna, Oskar-Morgenstern-Platz 1, 1090 Vienna, HS 9, 1st floor 4:00 pm Marco Bassetto<http://users.nber.org/~bassetto/> and Stefania Albanesi<http://www.newyorkfed.org/research/economists/albanesi/> University College London Federal Reserve Bank of New York Speculative Runs on Interest Rate Pegs (Marco Bassetto) Abstract: We analyze a new class of equilibria that emerges when a central bank conducts monetary policy by setting an interest rate (as an arbitrary function of its available information) and letting the private sector set the quantity traded. These equilibria involve a run on the central bank's interest target, whereby money grows fast, private agents borrow as much as possible against the central bank, and the shadow interest rate is different from the policy target. We argue that these equilibria represent a particular danger when banks hold large excess reserves, such as is the case following periods of quantitative easing. Our analysis suggests that successfully managing the exit strategy requires additional tools beyond setting interest-rate targets and paying interest on reserves; in particular, freezing excess reserves or fiscal-policy intervention may be needed to fend off adverse expectations. paper jointly with Christopher Phelan Insolvency After the 2005 Bankruptcy Reform<https://www.ihs.ac.at/fileadmin/public/ecofin_teaching/Seminars/20150416_Paper_Albanesi.pdf> (Stefania Albanesi) Abstract:<http://users.nber.org/~bassetto/> Using a comprehensive panel data set on U.S. households, we study the effects of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), the most substantive reform of personal bankruptcy in the United States since the Bankruptcy Reform Act of 1978. The 2005 legislation introduced a means test based on income to establish eligibility for Chapter 7 bankruptcy and increased the administrative requirements to file, leading to a rise in the opportunity cost and, especially, the financial cost of filing for bankruptcy. We study the effects of the reform on bankruptcy, insolvency, and foreclosure. We find that the reform caused a permanent drop in the Chapter 7 bankruptcy rate relative to pre-reform levels, due to the rise in filing costs associated with the reform, which can be interpreted as resulting from liquidity constraints. We find that the decline in bankruptcy filings resulted in a rise in the rate and persistence of insolvency as well as an increase in the rate of foreclosure. We find no evidence of a link between the decline in bankruptcy and a rise in the number of individuals who are current on their debt. We document that these effects are concentrated at the bottom of the income distribution, suggesting that the income means tests introduced by BAPCPA did not serve as an effective screening device. We show that insolvency is associated with worse financial outcomes than bankruptcy, as insolvent individuals have less access to new lines of credit and display lower credit scores than individuals who file for bankruptcy. Since bankruptcy filings declined much more for low-income individuals, our findings suggest that, for this group, BAPCPA may have removed an important form of relief from financial distress. paper jointly with Jaromir Nosal We are looking forward to seeing you! 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