The deferred recognition of COVID-induced losses at banks in many countries hasreignited the debate on regulatory forbearance. This paper presents a model where thepublic's own political pressure drives regulatory policy astray, because the public is poorlyinformed. Using probabilistic game...

In this paper, we discuss whether and how bank lobbying can lead to regulatory capture and have real consequences through an overview of the motivations behind bank lobbying and of recent empirical evidence on the subject. Overall, the findings are consistent with regulatory capture, which...

This paper presents a new version of MAPMOD (Mark II) to study the effectiveness of macroprudential regulations. We extend the original model by explicitly modeling the housing market. We show how household demand for housing, house prices, and bank mortgages are intertwined in what we call a...

This paper investigates macroprudential policy effects on bank systemic risk and the role of inflation targeting in such effects. Using bank-level data for 45 countries comprising various monetary and exchange rate regimes, our regime-dependent dynamic panel regression results point to...

Machine learning tools are well known for their success in prediction. But prediction is not causation, and causal discovery is at the core of most questions concerning economic policy. Recently, however, the literature has focused more on issues of causality. This paper gently introduces some...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...

Cyber risk is an emerging source of systemic risk in the financial sector, and possibly a macro-critical risk too. It is therefore important to integrate it into financial sector surveillance. This paper offers a range of analytical approaches to assess and monitor cyber risk to the financial...

Motivated by the tension first revealed during the global financial crisis between thedomestic and international financial stability obligations of central bank reserve managers,this paper offers some reflections along four main lines. First, the paper highlights howofficial reserve management...

This paper analyzes the nonlinear relationship between monetary policy and financial stress and its effects on the transmission of shocks to output. Results from a Bayesian Threshold Vector Autoregression (TVAR) model show that the effects of monetary policy shocks on output growth are stronger...

This paper studies the transmission of bank capital shocks to loan supply in Indonesia. A series of theoretically founded dynamic panel data models are estimated and find nonlinear effects of capital on loan growth: the response of weaker banks to changes in their capital positions is larger...