Negative monetary policy rates are associated with a particular friction because the remuneration of retail deposits tends to be floored at zero. We investigate whether this friction affects banks’ reactions when the policy rate is lowered to negative levels, compared to a standard rate cut in...

Macroprudential policies should strengthen the banking sector throughout the financial cycle. However, while bank credit growth is used to capture cyclical exuberance and calibrate buffer requirements, it depends on potentially heterogeneous dynamics on the borrower and lender sides. By...

In financial crises, the premium on liquid assets such as US Treasuries increases alongside credit spreads. This paper explains the link between the liquidity premium and spreads. We present a theory of endogenous bank fragility arising from a coordination friction among bank creditors. The...

Financial asset prices contain a rich set of real-time information on the economy. To extract this information, it is crucial to understand the driving factors behind financial market developments. In this paper, we exploit daily cross-asset price movements in a sign-restricted BVAR model to...

We study state dependence in the impact of monetary policy shocks over the leverage cycle for a panel of 10 euro area countries. We use a Bayesian Threshold Panel SVAR with regime classifications based on credit and house prices cycles. We find that monetary policy shocks trigger a smaller...

This study analyses the policy measures taken in the euro area in response to the outbreak and the escalating diffusion of new coronavirus (COVID-19) pandemic. We focus on monetary, microprudential and macroprudential policies designed specifically to support bank lending conditions. For...

In this paper, we study the effects of structural shocks that influence global risk - the main factor behind a "global capital flows cycle" - and how risk, in turn, is transmitted to capital flows. Our results show that not all the risk shocks driving the global financial cycle have the same...

We use a confidential euro area bank-level data set of close to 250 banks to assess outward and inward spillovers of unconventional monetary policies on bank lending. We find that euro area banks increase lending to the rest of the world in response to non-standard ECB monetary policy...

In a highly interlinked global economy a key question for policy makers is how foreign shocks and policies transmit to the domestic economy. We develop a semi-structural multi-country model with rich real and financial channels of international shock propagation for the euro area, the US, Japan,...

The secular decline in the equilibrium real interest rate observed over the past decades has materially limited the room for policy-rate reductions in recessions, and has led to a marked increase in the incidence of episodes where policy rates are likely to be at, or near, the effective lower...