Central banks’ economic and political importance has grown in advanced economies since the start of the Great Financial Crisis in 2007. An unwillingness or inability of governments to use countercyclical fiscal policy has made monetary policy the only stabilization tool in town. However, much...

This paper examines the role of long-term debt in political support for a monetary union or, more generally, an inflation-reduction policy. The central idea is that the decision on membership of the union leads to a redistribution between debtors and creditors, if they are holding long-term debt...

This paper considers the economic and political drivers of sovereign default, focusing on countries rich enough to render sovereign default a ‘won’t pay’ rather than a ‘can’t pay’ phenomenon. Unlike many private contracts, sovereign debt contracts rely almost exclusively on...

On May 9, 2010 euro zone countries announced the creation of the European Financial Stability Facility as a response to the sovereign debt crisis. This paper investigates the impact of this announcement on bank share prices, bank CDS spreads and sovereign CDS spreads. The main private...

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

The recent crisis has led to a thriving academic and policy debate on the future regulation of financial institutions and markets. This paper argues that the objective of securing financial stability should be balanced with the goal of fostering financial deepening and efficiency, especially in...

In the real world of less than perfect markets, balancing the benefits and costs of financial liberalization is usually impossible ex ante. Having been slow to liberalize, postwar Europe offers a possible testing ground. Looking at the experience in Belgium, France and Italy, a number of...

Crowding-out during the British Industrial Revolution has long been one of the leading explanations for slow growth during the Industrial Revolution, but little empirical evidence exists to support it. We argue that examinations of interest rates are fundamentally misguided, and that the...

This paper studies the determinants of global liquidity using data on cross-border bank flows, with a longer time series and broader country sample than previous studies. We define global liquidity as non-price determinants of cross-border credit supply, consistent with its meaning as the...

The Riksbank faces challenges with regard to each of its three core functions, conducting monetary policy with the objective of stabilising inflation around the inflation target and resource utilisation around a sustainable level, promoting a safe and efficient payment system and thereby...