We study empirically how competition among high-frequency traders (HFTs) affects their trading behavior and market quality. Our analysis exploits a unique dataset, which allows us to compare environments with and without high-frequency competition, and contains an exogenous event - a tick size...

In this paper we present a methodology of model-based calibration of additional capital needed in an interconnected financial system to minimize potential contagion losses. Building on ideas from combinatorial optimization tailored to controlling contagion in case of complete information about...

This paper investigates the impact of the capital relief package adopted to support euro area banks at the outbreak of the COVID-19 pandemic. By leveraging confidential supervisory and credit register data, we uncover two main findings. First, capital relief measures support banks' capacity to...

We study sovereign yield dynamics and order flow in the largest euro-area treasury markets. We exploit unique transaction data to explain daily yield changes in the ten-year government bonds of Italy, France, Belgium, and Germany. We use a state space model to decompose these changes into (i) a...

We assess monetary convergence preceding the implementation of the European Monetary Union (EMU) through Kalman filtering estimates of the risk premium of eleven forward exchange rates of European and non-European currencies. Since all participating currencies are in effect identical from...

The investment fund sector, the largest component of the non-bank financial system, is growing rapidly and the economy is becoming more reliant on investment fund financial intermediation. This paper builds a dynamic stochastic general equilibrium model with banks and investment funds. Banks...

While regulatory capital buffers are expected to be drawn to absorb losses and meet credit demand during crises, this paper shows that banks were unwilling to do so during the pandemic. To the contrary, banks engaged in forms of pro-cyclical behaviour to preserve capital ratios. By employing...

Using granular data from the European corporate credit register, we examine how increases in macroprudential capital buffer requirements since the pandemic have affected bank lending behaviour in the euro area. Our findings reveal that, for the average bank, the buffer requirement increases did...

This paper evaluates the resilience benefits of borrower-based macroprudential policies-such as LTV, DSTI, or DTI caps-for households and banks in the EU. To that end, we employ a further developed variant of the integrated micro-macro simulation model of Gross and Población (2017). Besides...

We investigate the interaction between monetary and macroprudential policy in affecting banks' lending and risk-taking behaviour using rich euro area credit registry data and exploiting a unique setting that combined a sharp and unexpected monetary tightening with a wave of macroprudential...