In this paper, we assess the impact of fiscal policy discretion on economic activity in the short and medium-term. Using a panel of 132 countries from 1960 to 2008, we find that fiscal policy discretion provides a net stimulus to the economy in the short-run and crowding-in effects are amplified...

This paper develops an arbitrage-free affine term structure model of potentially defaultable sovereign bonds to model a cross-section of eight euro area government bond yield curves since January 1999. The existence of a common monetary policy under European Monetary Union determines the short...

Reserve requirements are a prominent policy instrument in many emerging countries. The present study investigates the circumstances under which reserve requirements are an appropriate policy tool for price or financial stability. We consider a small open economy model with sticky prices,...

We measure the commonality in hedge fund returns, identify its main driving factor and analyze its implications for financial stability. We find that hedge funds’ commonality increased significantly from 2003 until 2006. We attribute this rise mainly to the increase in hedge funds’ exposure...

In this paper, we analyse the interactions between monetary and macro-prudential policies and the circumstances under which such interactions call for their coordinated implementation. We start with a review of the interdependencies between monetary and macro-prudential policies. Then, we use a...

In this paper, we analyse the interactions between monetary and macro-prudential policies and the circumstances under which such interactions call for their coordinated implementation. We start with a review of the interdependencies between monetary and macro-prudential policies. Then, we use a...

We study the liquidity allocation among European banks around the Lehman Brothers’ insolvency using a novel dataset of all interbank loans settled via the Eurosystem’s payment system TARGET2. Following the Lehman insolvency, lenders in the overnight segment become sensitive to counterparty...

In response to the very large number of quantitative indicators that have been put forward to measure the level of systemic risk since the start of the subprime crisis, the paper surveys the different indicators available in the economic and financial literature. It distinguishes between (i)...

We explore the practical relevance from a supervisor's perspective of a popular market-based indicator of the exposure of a financial institution to systemic risk, the marginal expected shortfall (MES). The MES of an institution can be defined as its expected equity loss when the market itself...

Measuring an intermediation rate is a good way of capturing the importance of the role of financial intermediaries in a given economy and their position in the face of the growth in market financing. Results show a quite sizeable decline in the financial intermediation rate in France over the...