combined with the theory of optimum currency areas. It shows how since the turn of the millennium a too expansionary monetary …

shock. However, its efficacy is dampened by a reverse bank lending channel that weakens the interest rate channel of QE … shock. Furthermore, we show that a shock in the form of a deposit shift between the two countries, interpreted as capital …

bank's choice of collateral standards in its lending facilities. Optimism on the side of banks, entailing a higher … collateral value of bank loans, can lead to excessive lending and bank default. Pessimism, though, can entail insufficient … lending and productivity losses. With an appropriate haircut on collateral, the central bank can perfectly neutralize the …

stability. We model the default of a large bank and analyse the resulting contagion effects. This is compared to a common shock …

market operations, counterparty and collateral framework, participation in tender operations, recourse to standing facilities …