Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and...

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing. However without an adequate regulation, intermediation may fail to do this. This paper studies the effects of a production shock in a closed economy and compares abilities of market-based and...

Countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations. However, countries with strong institutions seldom experience significant falls in output after capital flow reversals. We...

We study the cross sectional return implications of technology shocks through the channel of capital reallocation. We present a model in which capital reallocation frictions limit the non-innovating firms' ability to redeploy assets when facing technology shocks and forces it to hold...

Using matched microdata for the UK, I estimate two distinct channels via which credit supply shocks affect mortgage debt: one that operates through price conditions in credit markets; and another that operates through non-price credit conditions and affects the quantity of credit supplied by...

This article investigates the effect of household income shocks on demand for deposits and its potential impacts on lending and real activities. Leveraging a proprietary panel of the bank-branch population in India and regional heterogeneity in income shocks, we make three main contributions....

This paper studies the long-run evolution of bank risk and its links to the macroeconomy. Using data for 17 advanced economies, we show that the riskiness of bank assets declined materially between 1870 and 2016. But even though bank assets have become safer, the losses on these assets are...

A structural Bayesian vector autoregression model predicts that - when accompanied by a decline in consumer confidence - a one-percent decrease in house prices is associated with a contraction of economic activity by 0.2 to 1.2 percent after one year. Results point to important second-round...

This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under discretion and face model uncertainty. The analysis is based on a New Keynesian model where banks supply loans to transaction constrained consumers. Our results confirm the...

How do financial development and financial integration interact? We focus on Japan's Great Recession after 1990 to study this question. Regional differences in banking integration affected how the recession spread across the country: financing frictions for credit-dependent firms were more...