This paper provides new evidence on the behaviour of euro area aggregate loans to the private sector. Using a sample … covering the last twenty years, a cointegrating vector linking the real stock of loans to a small set of domestic macroeconomic … variables is found. Besides real GDP and prices, this set includes a new measure of the cost of loans obtained as a weighted …

The paper analyses the relationship between deposit insurance, debt-holder monitoring, and risk taking. In a stylised … debt holders. We further find that credible limits to the safety net reduce risk taking of smaller banks with low charter …

experiencing a favourable supply side shock consumes more against expected future output and spreads the risk by selling shares …

We analyze optimal hedging contracts and show that although hedging aims at sharing risk, it can lead to more risk …-taking. News implying that a hedge is likely to be loss-making undermines the risk-prevention incentives of the protection seller …. This incentive problem limits the capacity to share risks and generates endogenous counterparty risk. Optimal hedging can …