Legacy asset overhang and incentive to shift risk due to government guarantees can both affect bank capital issuance and lending decisions. We show that such frictions lead to ambiguous predictions on how one should expect a bank to react to a change in capital requirements. One sustained...

We argue that the uncertainty over the impact of macroprudential policy need not make a policymaker more cautious. Our starting point is the classic result of Brainard (1967) which finds that uncertainty over the impact of a policy instrument will make a policymaker less active. This result is...

Swap lines between advanced-economy central banks are a new important part of the global financial architecture. This paper analyses their monetary policy effects from three perspectives. First, from the perspective of the central banks, it shows that the swap line mimics discount-window credit...