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The current economic policy discussion on financial integration in the European Union concentrates on cross-border mergers. We study the impact of cross-border lending in a theoretical model where banks acquire either hard or soft information on borrowing firms and predict that the closer firms...
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Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the … emerge, depending on the magnitude of liquidity risks. In this context, regulatory stability-enhancing measures have some … disintermediation, when liquidity risks are only moderate and financial stability is barely a threat. Adopting a regulatory margin call …
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We examine financial intermediation when banks can offer deposit or loan contracts contingent on macroeconomic shocks. We show that the risk allocation is efficient if there is no workout of banking crises. In this case, banks will shift part of the risk to depositors. In contrast, under a...
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