What are the drivers of the large Target2 (T2) balances that have emerged in the European Monetary Union since the start of the financial crisis in 2007? This paper examines the extent to which the evolution of national T2 balances can be statistically associated with cross-border private...

This paper uses panel vector autoregressive models and simulations of an estimated DSGE model to explore the reaction of Euro–area banks to the global financial crisis. We focus on their interest–rate setting behavior in response to standard macroeconomic shocks. Our main empirical finding...

This paper employs a panel vector autoregressive model for the member countries of the Euro Area to explore the role of banks during the slump of the real economy that followed the financial crisis. In particular, we seek to quantify the macroeconomic effects of adverse loan supply shocks, which...