Since 2008, the central banks of advanced countries have borrowed trillions of dollars from their commercial banks in the form of interest-paying reserves and invested the proceeds in portfolios of risky assets. We investigate how this new style of central banking affects central banks'...

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The standard argument - that banks can - hinges on deposit inflows that are seeking a safe haven and provide banks with a natural hedge to fund drawn credit lines and other commitments....

We argue that China's rising shadow banking was inextricably linked to potential balance-sheet risks in the banking system. We substantiate this argument with three didactic findings: (1) commercial banks in general were prone to engage in channeling risky entrusted loans; (2) shadow banking...

How do banks respond to asset booms? This paper examines i) how U.S. banks responded to the World War I farmland boom; ii) the impact of regulation; and iii) how bank closures exacerbated the post-war bust. The boom encouraged new bank formation and balance sheet expansion (especially by new...

This paper investigates movements of market indicators of banking fragility, namely, Japan premium, stock prices, and credit derivative spreads of Japanese banks. Although the Japan premium in the euro-dollar market seemed to have virtually disappeared since April 1999, credit and default risks...

We develop a new tractable model of banks' liquidity management and the credit channel of monetary policy. Banks finance loans by issuing demand deposits. Because loans are illiquid, deposit transfers across banks must be settled with reserves. Deposit withdrawals are random, and banks manage...

Motivated by the regional bank crisis of 2023, we model the impact of interest rates on the liquidity risk of banks. Prior work shows that banks hedge the interest rate risk of their assets with their deposit franchise: when interest rates rise, the value of the assets falls but the value of the...

The massive rise in U.S. stockholding during the early twentieth century resulted in the deepening of securities markets, the spread of investment banks, and the expansion of publicly held corporations. This paper makes use of a unique panel database of South Dakota bank stockholders from...