This study investigates the benefits of cash in a general context. First, we explicitly address the arguments of cash critics, who are calling for cash to be abolished altogether. Second, we show that cash plays a crucial role in the current two-tier banking system. Third, we are discussing a...

Normal demand will return to pre-pandemic levels only when conditions for living a normal life also gradually come back. And this will not happen before a vaccine is discovered, produced and administered or a cure is in place. The article questions the wisdom of prematurely using recession...

This paper examines empirically the role of bank market power as an internal factor influencing banks’ reaction in terms of lending and risk-taking to monetary policy impulses. The analysis is carried out for the US and euro-area banking sectors over the period 1997-2010. Market power is...

Levels of interest rates below historical norms may have enhanced financial instability in both developed and in developing economies during the 2000´s. The risk-taking channel of monetary transmission policy is a recent theory that explains theinteraction between risk perceptions of the...

This paper investigates the effect that the creation of the Monetary Policy Committee (MPC) has had on the interest rate risk which banks and life insurance companies face in the UK. By means of GARCH-M methodology, the stock returns are modelled on the CAPM and the Fama-French asset-pricing...

Unconventional monetary policy tools are based on the belief that there exists a zero-lower bound on interest rates. This paper argues, based on economic theory and the empirical evidence, that this belief is a myth and not a reality. It is shown that a negative default-free spot rate of...

This paper focuses on policy measures taken to curb bank credit growth in the private sector in the pre-crisis period 2003–2007. Our analysis is based on an original survey conducted in 2010 on eleven central banks in Central and Eastern Europe (CEE). The findings reveal substantial policy...

Do low interest rate environments lead to greater bank risk-taking? We show that, when banks can adjust their capital structures, reductions in real interest rates lead to greater leverage and higher risk for any downward sloping loan demand function. However, if the capital structure is fixed,...

The main purpose of this article is to analyze how sovereign risk influences the loan supply reaction of banks to monetary policy through the bank lending channel. Additionally, we aim to test whether this reaction differs in easy and tight monetary regimes. Using a sample of 3125 banks from the...

Monetary policy can have an impact on economic and financial stability through the risk taking of banks. Falling interest rates might induce investment into risky activities. This paper provides evidence on the link between monetary policy and bank risk taking. We use a factor-augmented vector...