We build a general equilibrium model with financial frictions that impede the effectiveness of monetary policy in stimulating output. Agents with heterogeneous productivity can increase investment by levering up, but this increases interim liquidity risk. In equilibrium, the more productive...

The financial crisis has been characterised by fragmentation in the transmission of monetary policy, reflected in high dispersion in the cost of bank finance for euro area firms. Using micro-level bank data across a number of euro area countries, we identify individual bank balance sheet...

This paper studies how banks' balance sheets and funding costs interact in the transmission of monetary-policy rates to banks' credit supply to firms. To do so, we use creditregistry data from Germany and Portugal together with the European Central Bank's policy-rate cuts in mid-2014. The...

We build a general equilibrium model with financial frictions that impede monetary policy transmission. Agents with heterogeneous productivity can increase investment by levering up, which increases liquidity risk due to maturity transformation. In equilibrium, more productive agents choose...

We show that negative policy rates affect the supply of bank credit in a novel way. Banks are reluctant to pass on negative rates to depositors, which increases the funding cost of high-deposit banks, and reduces their net worth, relative to low-deposit banks. As a consequence, the introduction...

How do banks operate in a negative policy rate environment? Bank profitability is threatened by policy rate cuts in negative territory because the zero lower bound on retail deposit rates prevents banks from benefiting from cheaper deposit funding costs. Contrary to some earlier research, this...

This paper investigates whether movements in the Bank of England's interest rate hindered the development of the United States by transmitting or amplifying crises during the first age of financial globalisation. Evidence that US monetary and financial developments entered into the Bank's...

Does banks' zombie lending induced by unconventional monetary policy also allow zombie firms to leverage their trade credit borrowing? We first provide evidence suggesting that - even in Germany - particularly weak banks used the European Central Bank's very long-term refinancing operations...

In this paper, we survey the nascent literature on the transmission of negative policy rates. We discuss the theory of how the transmission depends on bank balance sheets, and how this changes once policy rates become negative. We review the growing evidence that negative policy rates are...

Using new quarterly narrative evidence, this paper examines the macroeconomic impact of reforms of unemployment benefits (UB) and employment protection legislation (EPL) in the euro area from a Bayesian narrative panel VAR. The approach complements existing micro-econometric evidence by aligning...