This paper uses data from a panel of more than 400 Italian banks for the period 2001-2012 to examine the main determinants of loan loss provision (LLP), which are classified as either discretionary (income smoothing, capital management, signalling) or non-discretionary (related to the business...

When firms borrow in foreign currency but collect revenues in local currency, exchange rate changes can affect their ability to repay their debt. Using loan-level data from U.S. banks' regulatory filings, this paper studies the effect of exchange rate changes on firms' loan payments. A 10...

We present a network model of the interbank market in which optimizing risk averse banks lend to each other and invest in non-liquid assets. Market clearing takes place through a tâtonnement process which yields the equilibrium price, while traded quantities are determined by means of a...

We examine the ability of policymakers to stimulate household borrowing and spending during the Great Recession by reducing banks' cost of funds. Using panel data on 8.5 million U.S. credit card accounts and 743 credit limit regression discontinuities, we estimate the marginal propensity to...

We develop a sovereign debt model with official and private creditors where default risk depends on both the level and the composition of liabilities. Higher exposure to official lenders improves incentives to repay but carries extra costs, such as reduced ex-post flexibility. The model implies...

Trade finance, particularly in the form of short-term letters of credit has received favourable capital treatment new Basel III rules. However, concerns have been expressed over the potential negative “unintended consequences” of the newly created leverage ratio for trade. This paper offers...