Main description: Almost every country in the world has sophisticated systems to prevent banking crises. Yet such crises--and the massive financial and social damage they can cause--remain common throughout the world. Does deposit insurance encourage depositors and bankers to take excessive...

[...]This paper aims to fill that gap by providing a simpleframework for analyzing the interactions between the threepillars of Basel II. We start by offering a critical assessment ofthe academic literature on the three pillars,5 and argue thatnone of the existing models allows for a...

We integrate bank and bond financing into a two-sector neoclassical growth model to examine the stabilization effect of endogenous bank leverage adjustment. We show that although bank leverage amplifies shocks, the increase of leverage to a decline in bank equity is an automatic stabilizer in...

" Continuous-Time Models in Corporate Finance synthesizes four decades of research to show how stochastic calculus can be used in corporate finance. Combining mathematical rigor with economic intuition, Santiago Moreno-Bromberg and Jean-Charles Rochet analyze corporate decisions such as dividend...

We develop a novel dynamic model of banking showing that aggregate bank capital is an important determinant of bank lending. In our model commercial banks finance their loans with deposits and equity, while facing equity issuance costs. Because of this financial friction, banks build equity...

This paper integrates banks into a two-sector neoclassical growth model to account for the fact that a fraction of firms relies on banks to finance their investments. There are four major contributions to the literature. First, although banks' leverage amplifies shocks, the endogenous response...