This paper addresses the trade-off between additional loss-absorbing capacity and potentially higher bank risk … increase their risk-taking. This increase in risk-taking however, should be more than outweighed by the benefits of higher …

-section of individual bank portfolio decisions. For this purpose, an augmented version of the DSGE model of Gertler and Karadi … (2013), featuring a segmented banking sector, is estimated for the euro area and combined with a bank portfolio optimisation … approach using granular bank level data. An important feature of our modelling approach is that it captures the heterogeneity …

initial share of bond- relative to bank-based finance; this effect weakens, and may even reverse, in economies with a low … when bank lending contracts …

central bank can make large and persistent mistakes to estimate potential output in response to productivity and cost shocks …

. For this purpose, it first extends the estimation of risk-neutral probability density functions up to tick frequency. In …

riskiness of counter parties and issuers is endogenous to the central bank's credit policies and related risk control framework … ability of banks to take recourse to central bank credit operations through changes of the collateral framework (e.g. CGFS … economy in which we illustrate the relevant trade-offs, derive optimal central bank collateral policies, and show why in a …

, or "uncertainty shocks", are an important model ingredient. First, they account for countercyclical movements in risk … changes in both risk-premia and expected future real rates, uncertainty shocks account for about 1/2 of the variance of long …