The drafting of macroprudential regulation is largely being driven by the need by policy makers to meet timetables that have been agreed. The legislative drive is taking place without any clear theoretical framework to organise the objectives. In this article we propose two principles that any...

This paper explores how different types of financial regulation could combat many of the phenomena that were observed in the financial crisis of 2007 to 2009. The primary contribution is the introduction of a model that includes both a banking system and a “shadow banking system” that each...

We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank's ability to survive a run. The incomplete information means that the...

We survey the existing work on the cross-country differences in the transmission of European monetary policy. We find that prior work, focusing on macroeconomic data, does not clearly answer the question posed in the title and offer some explanations for the ambiguity.