We show that through facilitating maturity transformation, the lender of last resort gives banks an incentive to lever, diversify, and lower their lending standards. Bank leverage increases shareholder value because maturity transformation effectively allows banks to borrow against lower...

This paper develops a methodology, based on Furfine (1999), to identify unsecured interbank money market loans from transaction data of the most important euro processing payment system, TARGET2, for maturity ranging from one day (overnight) up to three months. The implementation has been...

We study the effects of Central Bank transparency on inflation and the output gap. We thus first identify a small analytical model which concludes that transparency affects the variability of inflation and output and not their average levels. Then we examine whether this conjecture holds...

We study the effects of Central Bank transparency on inflation and the output gap. We thus identify a small analytical model which concludes that transparency affects the variability of inflation and output and not their average levels. Then we examine whether this conjecture holds empirically,...

Some central banks have a reputation for being secretive. A justification for that behavior thatwe find in the literature is that being transparent about its operations and beliefs hinders the central bank in achieving the best outcome. In other words, a central bank needs flexibility and...

The central bank's influence on private sector expectations is an important channel of monetary policy. Therefore, it is important for a central bank to pay attention to its communication. It should also be aware that the public might not be willing or able to process all the information that...

This paper develops a game theory model to analyze the optimal structure of the Lender of Last Resort in Europe. When depositors are imperfectly informed, the indifference to international transmission displayed by national authorities has value. A centralized authority, because it internalizes...

This paper tests for the transmission of the 2007-2010 financial and sovereign debt crises to fifteen EMU countries. We use daily data from 2003 to 2010 on country financial and non-financial stock market indexes. First, we find strong evidence of crisis transmission to European non-financials...

International trade relies on trade finance (credit or insurance) by financial institutions. Data limitations, however, have made it difficult to quantify the impact of changes in the supply of trade finance on trade. This paper is the first to establish a causal link between the supply of...

When does the general public lose trust in banks? We provide empirical evidence using responses by Dutch survey participants to eight hypothetical scenarios. We find that members of the general public care strongly about executive compensation. Negative media reports, falling stock prices, and...