identification techniques for regime switching models. Recently developed theoretical models emphasize the role of bank balance …

in line with the economic conditions they face. Bank responses feed back to the macroeconomic environment affecting …

contract their balance sheets. These bank responses generate externalities that propagate in the form of macro … macro-financial feedback loops can significantly affect macroeconomic outcomes and bank-specific stress tests results. The … heterogeneity in bank lending responses matters: it determines how each bank fares under adverse conditions and the external effects …

results highlight the importance of the starting level of bank capital, bank asset quality, and banks' adjustments for the …