In this paper, we examine the effect of reserve creation due to the Federal Reserve’s Large-scale Asset Purchase programs on bank lending and risk-taking behavior. In particular, we test the existence of a risk-taking channel that induces banks with higher reserve accumulation due to the...

In this paper, we examine the effect of reserve creation due to the Federal Reserve’s Large-scaleAsset Purchase programs on bank lending and risk-taking behavior. In particular, we test the existence of a risk-taking channel that induces banks with higher reserve accumulation due to the...

This paper analyzes the efficiency of risk-taking decisions in an economy that is prone to systemic risk, captured by financial amplification effects that occur in response to strong adverse shocks. It shows that decentralized agents who have unconstrained access to a complete set of Arrow...

This paper develops a simple macroeconomic model of systemic risk in the form of financial accelerator effects: adverse developments in financial markets and in the real economy mutually reinforce each other and lead to a feedback cycle of falling asset prices, deteriorating balance sheets and...

In this paper we study the effect of institutional reform on the decision to hold risky assets at the extensive and the intensive margin. We therefore make use of the natural experiment of German Division and Reunification and, based on savings bank customer data from German savings banks, study...

This paper analyzes the efficiency of risk-taking decisions in an economy that is prone to systemic risk, captured by financial amplification effects that occur in response to strong adverse shocks. It shows that decentralized agents who have unconstrained access to a complete set of Arrow...

This study examines cost and profit efficiencies of banking sectors in the 27 European Union countries over the period 2004-2010 using the stochastic frontier analysis (SFA). The study divides the EU sample into four sub-samples; the entire EU, the old and the new EU countries as well as the...

We build on the estimated sectoral effects of climate transition policies from the general equilibrium models of Jorgenson et al. (2018), Goulder and Hafstead (2018), and NGFS (2022a) to investigate U.S. banks’ exposures to transition risks. Our results show that while banks’ exposures are...

There is increasing interest in assessing the impact of climate policies on the value of financial sector assets, and consequently on financial stability. Prior studies either take a “black box” macro-modelling approach to climate stress testing or focus solely on equity instruments –...

In the post-WWII (since the 1950s), there have been over 400 banking, currency, and sovereign debt crises, which translates to about 10 crises per annum; furthermore, the combined cost of the last five crises since the late 1990s is in excess of $30 trillion, but when the cost of the COVID-19...