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FINANCIAL FRAGILITY Financial crises cause major disruption to the workings of financial
markets and institutions. In my research, I study the origins and
consequences of financial fragility and financial crises. My focus is on
coordination problems as a source of fragility. Coordination failures arise
when investors redeem their investments because they fear the damage caused
by the redemptions of other investors. The result is a massive redemption
based on a self-fulfilling belief. Most of my work in this area is
theoretical. Many of my papers apply and extend tools of the global-games
methodology, which proved to provide a useful approach for studying financial
crises. Recently, I have also used this approach to provide empirical
evidence for the role of coordination problems in generating financial-market
fragility. My papers that fall into this broad research area include: Payoff Complementarities and Financial Fragility: Evidence from Mutual Fund Outflows with Qi Chen and Wei Jiang (Latest Version: May 2008) Learning and
Complementarities: Implications for Speculative Attacks with An Information Based Trade off Between Foreign Direct Investment and Foreign Portfolio Investment with Assaf Razin, Journal of International Economics, vol. 70(1), pp. 271-295, September 2006 Demand Deposit Contracts and the Probability of Bank Runs with Ady Pauzner, Journal of Finance, vol. 60(3), pp. 1293-1328, June 2005 - Reprinted in Financial Crises, International Library of Critical Writings in Economics, Franklin Allen and Douglas Gale ed. - Nominated for Smith Breeden Prize for the best article published in the Journal of Finance, 2005. Strategic Complementarities and the Twin Crises Economic Journal, vol. 115, pp. 368-390, April 2005 The Choice of Exchange Rate Regime and Speculative Attacks with Alex Cukierman and Yossi Spiegel, Journal of the European Economic Association, vol. 2(6), pp. 1206-1241, December 2004 Contagion of Self-Fulfilling Financial Crises Due to Diversification of Investment Portfolios with Ady Pauzner, Journal of Economic Theory, vol. 119(1), pp. 151-183, November 2004 |