that well-functioning credit markets would reflect a bank channel for monetary policy at work, we test whether a change in … and the associated change in interest rate does not affect change in bank credit, change in total debt and the proportion … of bank credit in total debt for any of the firms. We discuss the policy implications of the findings. …

undercapitalisation, and the misallocation of credit. In our model, credit traps arise when shocks to bank equity capital tighten banks … productivity weakens bank capital generation, reinforcing tight borrowing constraints, sustaining the credit trap steady state …, restrictions on bank leverage can help to enhance the economy's resilience to the shocks that can cause credit traps. Further, a …

-section of individual bank portfolio decisions. For this purpose, an augmented version of the DSGE model of Gertler and Karadi … (2013), featuring a segmented banking sector, is estimated for the euro area and combined with a bank portfolio optimisation … approach using granular bank level data. An important feature of our modelling approach is that it captures the heterogeneity …