We develop a theoretical framework that encompasses four distinct motives for dollarization and discuss appropriate policy responses to help contain dollarization and its attendant risks. ""Moral hazard"" dollarization provides a clear case for prudential policy activism. However, prudential...

The paper has three objectives. After a general introduction to some of the concepts and basic techniques of stress testing, the paper gives an overview of some of the conceptual issues involved in evaluating risks at the aggregated level of financial systems. Second, this study provides a basic...

Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, we find that these policies are associated with lower credit growth. These effects are especially significant for micro, small and medium enterprises...

This paper examines the association between the default risk of foreign bank subsidiaries in developing countries and their parents during the global financial crisis, with the purpose of determining the size and sign of this correlation and, more importantly, understanding what factors can help...

This paper offers novel evidence on the impact of raising bank capital requirements in the context of an emerging market: Peru. Using quarterly bank-level data and exploiting the adoption of bank-specific capital buffers, we find that higher capital requirements have a short-lived, negative...

The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on market power, we rely on the experience of the global financial crisis and exploit granular data on government interventions in more than 800 banks across...

We examine trends in bank competition since the early 2000s. The Lerner index-arguably the most commonly used measure-shows evidence of a marked increase in market power in advanced economies, especially after the global financial crisis. But other frequently used indicators of banking sector...

This short paper reviews recent literature on the use of long-term finance in developing economies (relative to advanced ones) to identify where long-term financing occurs, and what role different financial intermediaries and markets play in extending this type of financing. Although banks are...

This paper presents recent trends in bank ownership across countries and summarizes the evidence regarding the implications of bank ownership structure for bank performance and competition, financial stability, and access to finance. The evidence reviewed suggests that foreign-owned banks are...