Shocks in the financial sector caused the great recession of 2008 and pulled down the real economy. To implement financial dynamics in a stylized DSGE-framework we use behavioral elements in expectations to produce waves of bull and bear cycles in the financial intermediation process, that have...

We argue that contingent convertible capital (CoCo-Bonds) might have perverse risk-taking incentives for banks (asset substitution problem) and discourage them from investing in positive NPV projects and issuing new equity in times of crisis (debt overhang problem). Whenever the conversion price...

This paper examines the determinants of bank failures in the US banking system during the recent financial crisis. The analysis employs a dataset on the financial statements of FDIC-insured commercial banks and their bank holding companies, along with information on bank failures, mergers, and...