The liquidity of financial system plays a central role in systemic crises. In this paper, we show that the ECB haircut policies provided an important liquidity support to distressed financial institutions during the euro area sovereign debt turmoil. Using novel, micro data on the pool of...

What factors cause banks to lend to the private sector in a bank-based financial system like the ones in place in Europe? In this paper we compare a traditional demand oriented model to a non-traditional capital budgeting model of bank lending based on movements in the equity cost of capital for...

Faced with a potential zero lower bound on deposit interest rates, how do banks pass on thefall in net interest income due to negative interest rates? This paper aims to investigate thedifferent channels of banks’ responses to negative interest rates using a detailed breakdownof the profit and...

Using security-level holdings for all euro-area investors, we study portfolio rebalancing during the quantitative easing program from March 2015 to December 2017. Foreign investors outside the euro area accommodated most of the Eurosystem's pur- chases. Duration, government credit, and corporate...

How do banks transmit long-term central bank liquidity injections to borrowers? We exploit unique variation in how the ECB's 2011-12 Long-Term Refinancing Operations (LTROs) affected lending to firms discontinuously across credit ratings (within banks) to make four contributions. (i) We show the...

The commitment ability of governments is neither infinite nor zero but intermediate. In this paper, we determine the commitment ability that a government needs to implement a unique equilibrium outcome and rule out undesired self-fulfilling expectations. We first show that, in a large class of...

As an extension to the literature on the risk-taking channel of monetary policy, this paper studiesthe existence of a systemic risk-taking channel (SRTC) in the Eurozone, through an originalmacroeconomic perspective based on causality measures. Because the SRTC is effective after an“incubation...

We measure the relative role of sovereign-dependence risk and balance sheet (credit) risk in euro area interbank market fragmentation from 2011 to 2015. We combine bank-to-bank loan data with detailed supervisory information on banks' cross-border and cross-sector exposures. We study the impact...

How do financial frictions in currency markets affect firm-level exports? We bring new answer to this question by looking at a recent episode in the summer of 2011 when the cost of US dollar funding increased markedly for European banks and their clients. Our analysis relies on a unique dataset...

We assess the effect of accepting illiquid assets as collateral at the central bank on banks' lending activity. We study the lending activity of the 177 largest banks in the Euro area between 2011m1 and 2014m12 and the composition of their pool of collateral pledged with the Eurosystem. Panel...