The financial liberalization in the four Nordic countries (Denmark, Finland, Norway, and Sweden) that took place mostly in the 1980s led to a major financial crisis in three of those countries. The crises in Finland, Norway, and Sweden are among the deepest financial crises in advanced market...

In this paper we study how the introduction of the euro has affected corporate financing in Europe. We use firm-level data from eleven euro area countries as well as from a control group of five other European countries spanning the years 1991–2006. We show that firms from euro area countries...

Since the introduction of the single currency in 1999, major progress has been made towards achieving an integrated European capital and financial market. Available evidence suggests, nevertheless, that the degree of integration varies greatly depending on market segment. Retail banking markets...

European banks have been criticized for holding excessive domestic government debt during economic downturns, which may have intensified the diabolic loop between sovereign and bank credit risks. By using a novel bank-level dataset covering the entire timeline of the Eurozone crisis, I first...

This paper presents a model depicting cross-border payment systems as a mixed oligopoly.A private net settlement system that maximises profit competes with the central banks' gross settlement system that maximises welfare.It may be optimal for the central bank system to encourage increased use...

The paper provides an overview of the sovereign debt crisis. I first consider the build-up of the crisis. I then discuss policy choices when a financial crisis erupts and assess the adjustment processes in the crisis countries, including alternatives to policies of austerity. Finally I take up...

We present a model of exchange rates, which incorporates the monetary approach and technical trading, and we present the reduced form based on the minimal state variable solution, where both fundamentals and backward-looking term determine the spot exchange rates. Finally, we estimate the impact...

This theoretical paper explores the effects of costly and non-costly collateral on moral hazard, when collateral value may fluctuate. Given that all collateral is costly, stochastic collateral will entail the same positive incentive effects as nonstochastic collateral, provided the variation in...

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 simulations...

This paper demonstrates that subordinated debt (‘subdebt' thereafter) regulation can be an effective mechanism for disciplining banks. Under our proposal, investors buy the subdebt of a bank only if they receive favourable information about the bank, and the bank is subject to a regulatory...