About

Deborah J. Lucas is the Sloan Distinguished Professor of Finance at the MIT Sloan School of Management and serves as the Director of the MIT Golub Center for Finance and Policy. Her recent research focuses on the intersection of finance and policy, with an emphasis on applying financial economics to measure the costs and risks associated with government financial activities. Her work includes developing methods to evaluate the value of government subsidies to development banks and state-owned enterprises, improving measurement of fiscal and macroeconomic effects of credit support and guarantee policies, assessing the sustainability of pension systems, and analyzing government financial products such as reverse mortgages and mortgage credit risk transfer securities. Lucas has held numerous influential roles, including Research Associate at the National Bureau of Economic Research, member of the Academic Research Council of the Housing Policy Center at the Urban Institute, and trustee for the NBER pension plans. She has also served as chief economist and assistant and associate director at the U.S. Congressional Budget Office, and has been a visiting scholar at the IMF. Her expertise on U.S. federal credit programs has led her to testify before Congress on issues related to Fannie Mae, Freddie Mac, student loans, and financial institutions. She is a member of several prestigious organizations, including the National Academy of Public Administration and the Econometric Society, and holds positions on various editorial and corporate boards.

Research topics

• Business
• Computer Science
• Political Science
• Finance
• Public administration
• Virology
• Medicine

Selected publications

• How Much Do Guarantees and Bailouts Cost the Government?

  SSRN Electronic Journal · 2025-01-01 · 2 citations

  preprintOpen access1st authorCorresponding
  PublisherDOI

• COVID-19 Credit Policies around the World: Size, Scope, Costs, and Consequences

  Brookings Papers on Economic Activity · 2023-03-01 · 12 citations

  articleSenior author

  ABSTRACT: Governments deployed credit policies on a historically unprecedented scale in response to the COVID-19 pandemic. We estimate the effective size of credit policies for seven large advanced economies in terms of the incremental resources provided to firms and households—a measure that allows aggregation across credit support, forbearance, and traditional fiscal policies but that does not appear in traditional government statistics. These estimates are used to reassess the absolute and relative size of different governments' policy interventions and to evaluate whether taking credit policies into account can help explain the cross section of macroeconomic outcomes. Incremental resources increase from an average 14.5 percent of 2020 GDP when only fiscal policies are considered to 22 percent of 2020 GDP when credit policies are also taken into account. Incorporating credit policies also reduces the cross-country variation in the total size of policy interventions. With regard to fiscal cost, fair value estimates for these credit support programs average 37 percent of principal, with wide variation depending on program features. We also discuss several related measurement issues, the financial regulatory changes that accommodated these programs, the pros and cons of the different types of credit policies, and how in principle budgetary costs should be calculated versus how governments account for credit policies in practice.

  PublisherDOI

• Introduction to the ARFE Theme on the Social Discount Rate

  Annual Review of Financial Economics · 2023-08-25 · 1 citations

  articleOpen access1st authorCorresponding

  Governments allocate a large share of real and financial capital globally, and their choices of discount rates for project and policy evaluation have a first-order effect on social welfare. The importance of adopting a principles-based approach to selecting discount rates has new urgency in light of the very long horizons over which the benefits and costs of policies to address climate change are being evaluated. The four articles in this theme provide an interpretive overview of the literature on many of the theoretical, practical, legal, and philosophical considerations for discount rate selection by governments. This introduction summarizes the main points of each article and highlights some of the common threads that emerge. These include the importance of using risk-adjusted rates, the problems that arise when discount rates are chosen to be artificially low, and the large disconnect between common government practices and the principles of financial economics.

  PublisherDOI

• Reflections on What Financial Economics Can and Cannot Teach Us About the Social Discount Rate

  Annual Review of Financial Economics · 2023-08-25 · 1 citations

  articleOpen access1st authorCorresponding

  The principles of financial economics provide equally important insights into the optimal choice of discount rates for both public and private sector decision-makers. However, most governments largely ignore those principles, taking their cost of capital for most purposes as their borrowing rate. This article reviews the arguments often made in support of status quo discounting practices, along with the counterarguments to them. Governments have a choice between several methodologies for risk adjustment, and the practical and conceptual reasons that favor a fair value approach are recapped. The limitations of a financial economics approach become apparent for decisions involving very long time horizons, such as for climate policies. For policies with long-term impacts, intergenerational concerns become paramount, projections of cash flows and discount rates become highly uncertain, and present value calculations are an intrinsically unreliable measure of value. No approach to discount rate selection can overcome those problems; alternative decision criteria need to be established. However, most government investments involve much shorter horizons, and the adoption of standard approaches to risk adjustment could significantly improve social welfare.

  PublisherOA PDFDOI

• Evaluating the Costs of Government Credit Support Programs during COVID-19: International Evidence

  IMF Working Paper · 2023 · 10 citations

  Senior authorCorresponding
  • Business
  • Virology
  • Medicine

  Advanced economies made available more than 5 trillion USD through government-supported credit guarantee and direct loan programs to provide lifelines to firms in the face of the COVID-19 pandemic. Notwithstanding the unprecedented scale of credit made available, an in-depth analysis of the fiscal consequences is missing, and the costs of these programs are not recognized in a transparent way. In this paper, we fill in an important aspect of the fiscal picture by estimating the subsidies that were provided by the largest credit guarantee programs introduced in 2020 in seven advanced economies. We estimate the subsidies on a fair value basis that provides a consistent and comprehensive upfront measure of cost. We explain the logic behind applying a fair value framework in a government context and compare it to alternative approaches. For the programs that we examine, total credit extended totaled 1.7 trillion USD. The subsidy element (cash-equivalent subsidy) is estimated to be 67 percent of loan principal on average (37 percent, excluding the US PPP), with a wide range across programs, from 12 to 100 percent. The variation is explained by differences across programs including eligibility criteria, loan terms, compensation to lenders, and other program design choices.

  PublisherOA PDFDOI

• Chapter 7. A Fair Value Approach to Valuing Public Infrastructure Projects and the Risk Transfer in Public Private Partnerships

  University of Chicago Press eBooks · 2021 · 5 citations

  1st authorCorresponding
  • Political Science
  • Computer Science
  • Business
  PublisherDOI

• Policy Rx for the Economy: Cash or Credit?

  World Scientific Book Chapters · 2021-01-01

  article1st authorCorresponding

  What is the best mix of cash and credit assistance to combat the economic fallout from the coronavirus pandemic, and what are the principles that should guide those choices? For policymakers to be able to design effective and affordable policies and avoid unintended consequences, it is essential that they understand the tradeoffs between these two broad policy alternatives. Yet this issue is rarely addressed head-on…

  Publisher

• A Fair Value Approach to Valuing Public Infrastructure Projects and the Risk Transfer in Public Private Partnerships

  NBER Chapters · 2020-03-03 · 5 citations

  article1st authorCorresponding
  Publisher

• Policy Rx for the Economy: Cash or Credit?

  WORLD SCIENTIFIC eBooks · 2020-12-29

  book-chapter1st authorCorresponding

  What is the best mix of cash and credit assistance to combat the economic fallout from the coronavirus pandemic, and what are the principles that should guide those choices? For policymakers to be able to design effective and affordable policies and avoid unintended consequences, it is essential that they understand the tradeoffs between these two broad policy alternatives. Yet this issue is rarely addressed head-on…

  PublisherDOI

• Measuring the Cost of Bailouts

  Annual Review of Financial Economics · 2019-11-26 · 72 citations

  articleOpen access1st authorCorresponding

  This review develops a theoretical framework that highlights the principles governing economically meaningful estimates of the cost of bailouts. Drawing selectively on existing cost estimates and augmenting them with new calculations consistent with this framework, I conclude that the total direct cost of the 2008 crisis-related bailouts in the United States was on the order of $500 billion, or 3.5% of GDP in 2009. The largest direct beneficiaries of the bailouts were the unsecured creditors of financial institutions. The estimated cost stands in sharp contrast to popular accounts that claim there was no cost because the money was repaid, and with claims of costs in the trillions of dollars. The cost is large enough to suggest the importance of revisiting whether there might have been less expensive ways to intervene to stabilize markets. At the same time, it is small enough to call into question whether the benefits of ending bailouts permanently exceed the regulatory burden of policies aimed at achieving that goal.

  PublisherOA PDFDOI

Frequent coauthors

• Robert L. McDonald

  Kellogg's (Canada)

  47 shared

• J.B. Heaton

  24 shared

• Robert A. Korajczyk

  12 shared

• Damien Moore

  Moody's Corporation (United States)

  12 shared

• Narayana Kocherlakota

  University of Rochester

  5 shared

• Gee Hee Hong

  Federal Reserve Bank of Atlanta

  5 shared

• Marvin Phaup

  George Washington University

  5 shared

• Stephen P. Zeldes

  Columbia University

  5 shared

Awards & honors

• Member of the National Academy of Public Administration
• Member of the National Academy of Social Insurance
• Senior Fellow of the Asian Bureau of Financial and Economic…
• Fellow of the Econometric Society
• Elected member of the National Academy of Public Administrat…