The investment fund sector, the largest component of the non-bank financial system, is growing rapidly and the economy is becoming more reliant on investment fund financial intermediation. This paper builds a dynamic stochastic general equilibrium model with banks and investment funds. Banks...

Using a unique dataset of the Euro area and the U.S. bank lending standards, we find that low (monetary policy) short-term interest rates soften standards, for household and corporate loans. This softening – especially for mortgages – is amplified by securitization activity, weak supervision...

Macroprudential policies are often aimed at the commercial banking sector, while a host of other non-bank financial institutions, or shadow banks, may not fall under their jurisdiction. We study the effects of tightening commercial bank regulation on the shadow banking sector. We develop a DSGE...

This paper explores the connection between "zombie" firms (firms that would typically exit in a competitive market) and bank health and the consequences for aggregate productivity in 11 European countries. Controlling for cyclical effects, the results show that zombie firms are more likely to be...

We analyse the cross-border propagation of prudential regulation in the euro area. Using the Prudential Instruments Database (Cerutti et al., 2017b) and a unique confidential database on balance sheets items of euro-area financial institutions we estimate panel models for 248 banks from 16...

Prior to the financial crisis, prudential regulation in the EU was implemented non-uniformly across countries, as options and discretions allowed national authorities to apply a more favorable regulatory treatment. We exploit the national implementation of the CRD and derive a country measure of...

This paper presents evidence that banks react to regulation in a forward-looking manner. A case study documents a reaction to Basel II as early as 2000, in other words about seven years prior to the implementation of the regulation in 2007. Based on the initial information released on Basel II,...

This paper explores the connection between ”zombie” firms (firms that would typically exit in a competitive market) and bank health and the consequences for aggregate productivity in 11 European countries. Controlling for cyclical effects, the results show that zombie firms are more likely...

This paper examines common regulation as cause of interbank contagion. Studies based on the correlation of bank assets and the extent of interbank lending may underestimate the likelihood of contagion because they do not incorporate the fact that banks have a common regulator. In our model, the...

The paper studies the central bank collateral framework and its impact on banks’ liquidity under an adverse stress test scenario. We construct a stress test model that accounts for a granular and multi-faceted representation of the liquidity of marketable and non-marketable assets. In...