Because of secrecy, little is known about the political economy of central bank lending. Utilizing a novel, hand …, highlighting the importance of governance for this core function of central banks. We show that, when faced with a banking panic in … to connected banks. Connected lending of last resort fueled the worst banking crisis in French history, caused an …

Because of secrecy, little is known about the political economy of central bank lending. Utilizing a novel, hand …, highlighting the importance of governance for this core function of central banks. We show that, when faced with a banking panic in … to connected banks. Connected lending of last resort fueled the worst banking crisis in French history, caused an …

We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its … core. The estimated model matches four facts about banks’ Tobin’s Q that summarize bank leverage dynamics. (1) Book and … market equity values diverge, especially during crises; (2) Tobin’s Q predicts future bank profitability; (3) neither book …