balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital … structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed …, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease …

models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending … rate sufficiently compensates banks for the borrowers' default risk. Firms denied credit cut employment and labor … reallocates mostly towards safer producers. Lending standards propagate bank capital shortfalls through labor misallocation …

scenarios can imply sizable deterioration in banks' capital positions …We propose a simple, parsimonious, and easily implementable method for stress-testing banks using a top-down approach … that evaluates the impact of shocks to macroeconomic variables on banks' capitalization. Our method relies on a variable …

scenarios can imply sizable deterioration in banks' capital positions …We propose a simple, parsimonious, and easily implementable method for stress-testing banks using a top-down approach … that evaluates the impact of shocks to macroeconomic variables on banks' capitalization. Our method relies on a variable …

I develop a theoretical model to examine the effect of capital requirements on risk taking and market structure of … banks. Within a portfolio choice model, I allow for heterogeneous productivity among banks and consider the simultaneous … capital regulation with a leverage ratio and a risk-weighted ratio. Regulators face a trade-off between the efficient …

I develop a theoretical model to examine the effect of capital requirements on risk taking and market structure of … banks. Within a portfolio choice model, I allow for heterogeneous productivity among banks and consider the simultaneous … capital regulation with a leverage ratio and a risk-weighted ratio. Regulators face a trade-off between the efficient …

I develop a model where the sovereign debt capacity depends on the capitalization of domestic banks. Low-capital banks … the sovereign risk is sufficiently high, low-capital banks reduce private lending to further increase their holdings of …