We explore the ability of a macroprudential policy instrument to dampen the consequences of equity mispricing (a bubble) and the correction thereof (the bubble bursting), as well as the consequences for real activity in a production economy. In our model, producers are financed by both bank debt...

Excessive credit growth is often considered to be an indicator of future problems in the financial sector. This paper examines the issue of how to determine whether the observed level of private sector credit is excessive in the context of the “countercyclical capital bufferâ€, a...

We provide a macro stress-testing model for banks' market and funding liquidity risks with a survival period of one and three months. The model takes into account the impact of both bank-specific and market-wide scenarios and considers both the first- and second-round effects of shocks. The...

In this paper we use Household Budget Survey data to analyze the evolution of the household credit market in the Czech Republic over the period 2000–2008. While the share of households that borrow remained stable and below 40%, the amount of debt outstanding increased. We estimate a...

This paper examines the impact of monetary conditions on the risk-taking behaviour of banks in the Czech Republic by analysing the comprehensive credit register of the Czech National Bank. Our duration analysis indicates that expansionary monetary conditions promote risk-taking among banks. At...

Regulators in many countries are currently considering ways to impose domestic systemic importance-based capital requirements on banks. Aiming to assist these considerations, this article discusses a number of issues concerning the calculation of a bank's systemic importance to the domestic...

This paper examines the potential for contagion within the Czech banking system via the channel of interbank exposures of domestic banks enriched by a liquidity channel and an asset price channel over the period March 2007 to June 2012. A computational model is used to assess the resilience of...

This study deals with credit risk modelling and stress testing within the context of a Merton-type one-factor model. We analyse the corporate and household sectors of the Czech Republic and Germany to find determining variables of credit risk in both countries. We find that a set of similar...

To provide a rigorous analysis of monetary policy in the face of financial instability, we extend the standard dynamic stochastic general equilibrium model to include a financial system. Our simulations suggest that if financial instability affects output and inflation with a lag, and if the...

In this paper, we estimate the interest rate pass-through from money market to bank interest rates using various heterogeneous panel cointegration techniques to address bank heterogeneity. Based on our micro-level data from the Czech Republic, the results indicate that the nature of interest...