This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank … guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank … cheaply, effectively shifting the risk of some of the potential sovereign default losses on the common central bank …

The US Federal Reserve cut interest rates more vigorously in the recent recession than the European Central Bank did …

variation in the supply of central bank liabilities. In effect, the announcement effect has displaced the liquidity effect as … bank to lend or absorb reserves in response to differences between the policy interest rate and the corresponding target. A …, but not on the current level per se, then the central bank can alter the market-clearing interest rate with no change in …

We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the period … from January 2006 to June 2010. We find evidence consistent with an impaired transmission channel due to bank risk. Central … bank liquidity does not translate into lower loan spreads for high-risk banks for maturities beyond one year, even as it …