This paper studies the relationship between the size of the banking sector’s refinancing needs vis-à-vis the central bank and auction rates in its open market operations in times of financial market stress. In a theoretical model, it is found that marginal rates at central bank auctions may...

This paper studies the relationship between the size of the banking sector’s refinancing needs vis-à-vis the central bank and auction rates in its open market operations in times of financial market stress. In a theoretical model, it is found that marginal rates at central bank auctions may...

Unsecured interbank money market rates such as the Euribor increased strongly with the start of the financial market turbulences in August 2007. There is clear evidence that these rates reached levels that cannot be explained alone by higher credit risk. This article presents this evidence and...

Are central bank tools effective in reaching non-banks with no access to the lender-of-last-resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale purchases, funds with higher ex ante shares of assets eligible for...

We empirically analyze the interaction of monetary policy with financial stability and the real economy in the euro area. For this, we apply a quantile vector autoregressive model and two alternative estimation approaches: simulation and local projections. Our specifications include monetary...

Using security-by-security data on investor holdings in the euro area, we study run dynamics across different fund-shares of the same fund during the unprecedented liquidity crisis in March 2020. For an average bond or equity mutual fund-share, households, other euro area funds, and the foreign...

This paper considers the implications of habit formation and financial frictions for the propagation of macroeconomic shocks. In a model that is capable of matching asset pricing moments, a short-lived shock that destroys a small fraction of the economy's stock of pledgeable collateral generates...

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 for...

This paper develops a theory of the credit cycle to account for recent evidence that capital is increasingly allocated to inefficiently risky projects over the course of the boom. The model features lenders who sell risk exposure to non-lender investors in order to relax borrowing constraints,...

This paper studies the effects of government guarantees on the interconnection between banking and sovereign debt crises in a framework where both the banks and the government are fragile and the credibility and feasibility of the guarantees are determined endogenously. The analysis delivers...