Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand...

We examine sources of systemic risk (threshold size, complexity, and interconnectedness) with factors constructed from equity returns of large financial firms, after accounting for standard risk factors. From the factor loadings and factor returns, we estimate the implicit government subsidy for...

A number of countries have gone through banking crises since the early 1970s. This work links those episodes with the patterns of various financial reforms within those countries. As banking crises are endogenous, crisis exposures to major trading partners help identify the causality between...

“Too big to fail” traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and unable to fulfill its obligations. Such a bank generally has substantial liabilities to other banks...

In this study, we benchmarked the crisis resolution frameworks of the Member States of the West African Monetary Zone (WAMZ) with the Financial Stability Board's Key Attributes (KAs) of effective resolution regime for financial institutions, using survey-based methodology. Questionnaires,...

Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the cycle. With forward-looking banks, lending cycles, credit booms and busts, or suppressed and highly fragile bank systems can emerge, depending on the magnitude of liquidity risks....

We present a methodology based on quarterly sectoral accounts to build a map of the euro area financial system. The map can be used to visualise existing cross-sectoral interconnections and exposures, to analyse how the main bilateral positions have evolved over time, and to understand how past...

This paper distils three lessons for bank regulation from the experience of the 2009-12 euro-area financial crisis. First, it highlights the key role that sovereign debt exposures of banks have played in the feedback loop between bank and fiscal distress, and inquires how the regulation of...

In the wake of the global financial crisis that erupted in 2008, there has been extensive commentary and regulatory focus on the 'Too Big to Fail' issue. In this paper, we survey the proposed solutions and regulatory initiatives that have been undertaken. We conduct a longitudinal analysis of...

This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks' desire to accumulate capital over time...