Financial Intermediaries and the Real Economy (FIRE)

Our Mission

Financial Intermediaries and the Real Economy (FIRE) at Frankfurt School of Finance & Management is a research-led think tank that promotes research and best practices on central issues facing economies and financial markets. FIRE builds on Frankfurt School’s high-class faculty to generate insights from the connection between practice and theory.

Our overall objective in the Centre is to conduct and disseminate new research across a wide array of financial topics and bring together academics, practitioners and regulators. Across different initiatives, our team provides high-level as well as in-depth research and analyses, develops and implements innovative projects, advises on policy development and changes, and provides training and workshops.Topics include banks and financial services, financial crises, monetary policy, debt markets, FinTechs and climate risk. Overall, the centre’s work focuses on the role of finance in solving today’s societal problems with a focus on Europe and the European Economy.

Faculty

AI in Finance

Financial Big Data Cluster (safeFBDC) – AI & Monetary Policy (BMWi,€1mn)

We explore the role of artificial intelligence (AI) and machine learning (ML) in central banking. AI/ML can strengthen policy analysis and decision-making, e.g. by providing tools as well as more and enhanced information to complement existing policy data.

Duration: 2021-2023

Private Capital Initiative

Bank Credit and the Macroeconomy – Cross-country evidence (DFG, €141,000)

We empirically investigate the role of bank credit in the macroeconomy across countries with a focus on the U.S. and Europe. In one project, we develop a loan market-based credit spread, explore its predictive power for industry-level and aggregate macroeconomic variables and investigate whether it reflects frictions in the supply of bank lending to non-financial firms.

Duration: 2020-2022

Green Finance Initiative

We investigate and understand the role of financial intermediaries in driving climate change. How should banks and markets be regulated? What is the role of central banks in this process? How do “climate stress test” affect banks and markets?

The outbreak of the COVID-19 pandemic severely affected economies globally. We provide in-depth analyses through academic research, white papers and discussions with industry and policy leaders as to the effects of COVID-19 and the responses of governments and central banks. Our focus is on the effects on firms and banks.

COVID-19 Contribution

• Why did bank stocks crash during COVID-19? Co-authored with V. Acharya and R. Engle. Teaching material (Dash for cash & bank stock price crash): Slides NYU MBA Class

• "No credit crunch (yet) – but here is why we should be worried" - 3 reasons why the European bank lending survey (Q2 2020) should worry us

• "Corporate Dash for Cash & Crash of Banks’ Stock Prices" - presentation on the Panel: Firms and Liquidity after COVID at the Brazilian Finance Meeting (16 July 2020) - based on work with Viral Acharya

• Youtube video from my panel with Heitor Almeida (Illinois at Urbana-Champaign), Raghu Rajan (Chicago Booth) and João Manoel de Pinho Mello (Central Bank of Brazil)

• "Bank capital and the European recovery from the COVID-19 crisis" (with M. Schularick and T. Troeger)

• Coronomics XXX - Firmen, Liquiditaet und Banken - Interview in Podcast (in German) von Christian Bayer (Uni Bonn) und Ruediger Bachmann (Notre Dame)

• "The risk of being a fallen angel and the corporate dash for cash in the midst of COVID" (with Viral Acharya), Review of Corporate Finance Studies 9, 430-47. Youtube video (interviewed by Tim Phillips, CEPR)

• Policy Version: COVID Economics (April 2020, Issue 10)
  Download PDF    Coverage FT Alphaville

• Short NBER Video

• Review of Corporate Finance Studies Spotlight

• "Stress Test" for Banks as Liquidity Providers in a time of COVID (with Viral Acharya), published on voxeu.org. Download PDF  Coverage Financial Times

• Press Briefing​: COVID-19 – Could this be the trigger for a new  financial crisis? (March 2020)

• A Protective Shield for Europe' Banks  ​(with M. Schularick)

Recent Research publications 

• Acharya, V.V. Chauhan,S.,R. Rajan, R., and S. Steffen, 2022. Liquidity Dependence: Why Shrinking Central Bank Balance Sheets is an Uphill Task, Draft

• Berg, T., A. Saunders, and S. Steffen, 2021. Trends in Corporate Borrowing, Annual Review of Financial Economics, forthcoming.

• Ilhan, E., Z. Sautner, and G. Vilkov, 2021. Carbon Tail Risk, Review of Financial Studies, forthcoming.

• Reisinger, M., and D. Streitz. Handling Spillover Effects in Empirical Research, Journal of Financial Economics, forthcoming.

• Cremers, M.,  A. Pareek, and Z. Sautner, 2021. Short-Term Institutions, Analyst Recommendations, and Mispricing: The Role of Higher-Order Beliefs, Journal of Accounting Research,  forthcoming

• Acharya, V.V., M. Jager, S. Steffen, and L. Steinruecke, 2020. Kicking the can down the road: government interventions in the European banking sector, Review of Financial Studies, forthcoming.

• Burg, V., A. Gombović, and M. Puri, 2020. On the Rise of FinTechs: Credit Scoring using Digital Footprints, Review of Financial Studies, 33(7), 2845-2897.

• Berg, T., A. Saunders, L. Schäfer, and S. Steffen, 2020. “Brexit” and the Contraction of Syndicated Lending, Journal of Financial Economics, forthcoming.

• Acharya, V.V., B. Imbierowicz, D. Teichmann, and S. Steffen, 2020. Does the Lack of Financial Stability Impair the Transmission of Monetary Policy? Journal of Financial Economics, 138 (2), 342-365.

• Acharya, V., and S. Steffen, 2020. The risk of being a fallen angel and the corporate dash for cash in the midst of COVID, Review of Corporate Finance Studies, 9, 430-471.

• Ladika, T., and Z. Sautner, 2020. Managerial Short-Termism and Investment: Evidence from Accelerated Option Vesting, Review of Finance, 24(2), 305-344.

• Cremers, M., A. Pareek, and Z. Sautner, 2020. Short-Term Investors, Long-Term Investments, and Firm Value: Evidence from Index Inclusions, Management Science, 66(10), 4535-4551.

• Krueger, P., Z. Sautner, and L. Starks, 2020. The Importance of Climate Risks for Institutional Investors, Review of Financial Studies, 33(3),1067-1111.

• Große-Rueschkamp, B., S. Steffen, and D. Streitz, 2019. A Capital Structure Channel of Monetary Policy. Journal of Financial Economics, 133 (2), 357-378.

• Fabisik, K., R. Fahlenbrach, R.M. Stulz, and J.Taillard, 2018. Why Are Firms with More Managerial Ownership Worth Less? Journal of Financial Economics (JFE), Forthcoming

Policy contributions

• Lautenbacher, S., J. Miethe, A. Peichl, S. Rumscheidt, and S. Steffen, 2021. Eigenkapital staerken?! Im Rahmen des Vertrags zur Erstellung volkswirtschaftlicher Studien, IHK für München und Oberbayern, ifo Zentrum für Makroökonomik und Befragungen.

• Acharya, V., and S. Steffen, 2020. The risk of being a fallen angel and the corporate dash for cash in the midst of COVID, Covid Economics,10, 44-61.

• Acharya, V., and S. Steffen, 2020. “Stress Test” for Banks as Liquidity Insurers in a time of COVID. VoxEU.

• Schularick, M., and S. Steffen, 2020. A Protective Shield for Europe’s Banks.