More than three years since the outbreak of the sovereign debt crisis in the euro area the banking systems of several countries remain exposed to the vagaries of government bond markets. The paper analyzes the different channels through which sovereign risk affects banking risk (and vice versa),...

In this paper we conduct a simulation run on a sample of Italian banks where a trigger shock, a one-off event fairly large in size, spreads through the interbank network in a set-up featuring among the actors both commercial banks and the authorities. The banks deleverage to comply with a...

We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers� default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and...

The process of European monetary integration has prompted interest in the study of differences in financial systems and their consequences for monetary transmission mechanisms. This paper analyses the case of a monetary union composed of countries with heterogeneous "credit channels". In order...

We assess the impact on the Italian economy of the main unconventional monetary policies adopted by the ECB in 2011-2012 (SMP, 3-year LTROs and OMTs) by following a two-step approach. We evaluate their effects on money market interest rates, government bond yields and credit availability and...

We analyse a simplified New-Keynesian model with an unobserved aggregate cost-push shock in which firms and the central bank have different information about the shock. We consider a linear policy rule where a pure inflation targeting central bank decides how much to react to the shock given its...

Monetary growth targeting is often seen as an effective way of supporting macroeconomic stability. We scrutinize this property by checking whether multiplicity of equilibria, in the form of local indeterminacy (LI), can be both a possible and a plausible outcome of a basic model with an...

We use a dynamic general equilibrium model of the euro area to study banks� possible responses to the stricter capital requirements called for by the Basel III reform package. We show that the effects on output depend, inter alia, on the strategy banks adopt in response to the reform, and...