We study public funding of banks and non-financial firms in a time of crisis. We find that bank capitalization is more effective in stabilizing the economy than direct funding to firms, but it also creates larger distortions. We show that the optimal, social-welfare-maximizing, structure of a...

This paper presents econometric analyses on the determination of bank deposit and lending rates using longitudinal Finnish data. Interest rate pass-through is very strong, possibly complete, in the case of lending rates; in the case of deposit rates the pass-through is far from complete, even in...

The macroeconomic determinants of banking sector distresses in the Nordic countries, Belgium, Germany, Greece, Spain and the UK are analysed using an econometric model estimated on panel data from partly the early 1980s to 2002.The dependent variable is the ratio of banks' loan losses to...

This paper tests the hypothesis that the more fragile a banking system is, the more likely it is to experience problems when an unexpected shock hits. The empirical framework where this test is conducted is a reduced form model, where macroeconomic factors explain banks' loan losses. The...

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...

We investigate the effects of credit ratings-contingent financial regulation on foreign bank lending behavior. We examine the sensitivity of international bank flows to debtor countries' sovereign credit rating changes before and after the implementation of the Basel 2 risk-based capital...

​We build a dynamic stochastic general equilibrium model, where the balance sheets of both banks and non-financial firms play a role in macro-financial linkages. We show that in equilibrium bank capital tends to be scarce, compared with firm capital. We study public funding of banks and firms...

Formal enforcement actions issued against banks for violations of laws and regulations related to safety and soundness can theoretically have both positive and negative effects on the terms of lending. Using hand-collected data on such enforcement actions issued against U.S. banks, we show that...

I study the link between house prices, lending standards, and aggregate over-investment in housing. I develop a model of the housing market where the credit market is affected by asymmetric information. Selection is towards less creditworthy borrowers. Asymmetric information coupled with...

We consider optimal capital requirements for banks' lending activities when the potential trade-off between financial stability and economic (productivity) growth is taken into account. Both sides of the trade-off are affected by banks' credit allocation, which in turn is affected by the risk...