We identify the origin of the contradicting perspectives on credit creation offered by Austrian, Mainstream and Post Keynesian economists as the neglect of the primacy of such assets as goods, properties and securities, which always pre-exist any transaction and loan. We develop a unified...

The sovereign debt crisis in the euro area has increased the interest in early warning indicators, with the aim to indicate the build up of fiscal stress early on and to facilitate crisis prevention by a timely counteraction of fiscal and macroeconomic policies. This paper presents possible...

This paper builds a macro-prudential tool designed to assess whether the banking sector is adequately prepared to orderly withstand losses resulting from normal or stressed macroeconomic and micro-economic scenarios. The link between the banking sector and the real sector is established via the...

The contribution of this paper is to revisit the Early Warning System (EWS) literature by analysing selected episodes of financial market crisis, i.e. those preceded by a spell of credit and real estate expansions. The aim is to disentangle instances when this constitutes a natural phenomenon...

Unsecured interbank money market rates such as the Euribor increased strongly with the start of the financial market turbulences in August 2007. There is clear evidence that these rates reached levels that cannot be explained alone by higher credit risk. This article presents this evidence and...

We study the functioning of secured and unsecured inter-bank markets in the presence of credit risk. The model generates empirical predictions that are in line with developments during the 2007-2009 financial crises. Interest rates decouple across secured and unsecured markets following an...

We study the functioning and possible breakdown of the interbank market in the presence of counterparty risk. We allow banks to have private information about the risk of their assets. We show how banks’ asset risk affects funding liquidity in the interbank market. Several interbank market...