This paper provides an explanation for the observation that banks hold on average a capital ratio in excess of regulatory requirements. We use a functional approach to banking based on Diamond and Rajan (2001) to demonstrate that banks can use capital ratios as a strategic tool for renegotiating...

This paper studies how capital requirements influence a bank’s mode of entry into foreign financial markets. We develop a model of an internationally operating bank that creates and allocates liquidity across countries and argue that the advantage of multinational banking over offering...

Since the beginning of the seventies, most OECD member countries have suffered from a substantial increase in measured unemployment rates. A notable exception is Japan, whose official unemployment rate is far below observed figures in other countries. This article examines the reasons why...

During a financial crisis, pressure on Central banks to act as a lender of last resort (LLR) and to offer emergency liquidity assistance to troubled banks increases. The European Central Bank, however, has announced that it does not regard it as its principal task to provide emergency liquidity...

Beginnt die japanische Notenbank mit ihrer lockeren Geldpolitik einen Abwertungswettlauf? Jürgen Matthes, Institut der deutschen Wirtschaft Köln, vertritt die These, dass derzeit nicht von einem echten Währungskrieg die Rede sein kann, dass es jedoch gewisse Anzeichen für eine mögliche...

This survey systematizes the rapidly growing literature on the influence of monetary policy and macroprudential policy on the macroeconomy. It examines the impact of monetary policy on the financial cycle and asks how macroprudential instruments influence the efficiency of monetary policy. The...

The article reviews the literature on the relationship between climate change and central bank policies. Central banks conduct monetary policy and are responsible for macroprudential supervision. The article focuses on the consequences of transition and physical risks for financial stability and...

In many countries, legislators have introduced special bank resolution regimes in order to handle the "too-big-to-fail"-(TBTF)-problem. Bank resolution schemes allow supervisors to restructure or liquidate an ailing bank, even without the consent of the bank owners. We identify key elements of...