On 3 July 2015, SUERF organized its sixth joint conference with the Bank of Finland in Helsinki on the subject of liquidity and market efficiency. The one-day program consisted of an opening speech, six presentations, including three keynotes, and a lunchtime address. The present SUERF Study...

We study whether the mechanism design in the central bank liquidity auctions matters for the interbank money market interest rate levels and volatility. Furthermore, we compare different mechanisms to sell liquidity in terms of revenue, efficiency and auction stage interest rate levels and...

Basel II framework requires banks to conduct stress tests on their potential future minimum capital requirements and consider ‘at least the effect of mild recession scenarios’. We propose a stress testing framework for minimum capital requirements in which banks’ corporate credit risks are...

In the discussion paper, we employ data on industry-specific corporate sector bankruptcies over the time period from 1986 to 2003 and estimate a macroeconomic credit risk model for the Finnish corporate sector. The sample period includes a severe recession with significantly higher-than-average...

Although beneficial allocational effects have been a central motivation for the Basel II capital adequacy reform, the interaction of these effects with Basel II’s procyclical impact has been less discussed. In this paper, we investigate the effect of Basel II on the efficiency of bank lending....

We study the effects on credit allocation and bank stability of introducing a leverage ratio requirement (LRR) on top of risk-based capital requirements, as in Basel III. For the current 3% LRR, both low-risk and high-risk loan rates and volumes remain essentially unchanged, because banks...

We show how banks’ excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in ‘normal’ times. Model...

This paper studies the gain from using money as an indicator when monetary policy in made under data uncertainty. We use a forward and backward looking model, calibrated for the euro area. The policymaker cannot completely observe the state of the economy. Money reveals some of the private...

Disinflationary episodes are a valuable source of information for economic agents trying to learn about the economy. In this paper we are particularly interested in how policymakers can themselves learn by disinflating. The approach differs from the existing literature, which typically focuses...