We analyze the implications of financial openness to macroeconomic volatility in a small open economy. Major macroeconomic aggregates show non-monotonic volatility patterns with respect to the degree of financial openness in the model without domestic financial frictions. The introduction of...

The present study seeks to analyse the provisions of the 2013 Charter of the Basel Committee on Banking Supervision, which is one of the most important international financial fora composing the architecture governing the international financial system. Its scope is confined to institutional and...

The quite recent (2007-2009) global financial crisis (GFC), which was caused by a mix of business, regulatory, supervisory, and macroeconomic (in terms of sub-optimal fiscal and/or monetary policies) failures, had a negative impact both on the financial system – with the failure, through the...

Banking crises are rare events that break out in the midst of credit intensive booms and bring about particularly deep and long-lasting recessions. This paper attempts to explain these phenomena within a textbook DSGE model that features a non-trivial banking sector. In the model, banks are...

Banking crises are rare events that break out in the midst of credit intensive booms and bring about particularly deep and long-lasting recessions. This paper attempts to explain these phenomena within a textbook DSGE model that features a non-trivial banking sector. In the model, banks are...

We develop a model of bank risk-taking with strategic sovereign default risk. Domestic banks invest in real projects and purchase government bonds. While an increase in bond purchases crowds out profitable investments, it improves the government's incentives to repay and therefore lowers its...

One of the main concerns associated with central bank digital currencies (CBDC) is the disintermediating effect on the banking sector in general, and the risk of bank runs in times of crisis in particular. This paper examines the implications of an interest-bearing CBDC on banking crises in a...

We provide an overview of the rapidly evolving literature on shadow credit intermediation. The shadow banking system consists of a web of specialized financial institutions that conduct credit, maturity, and liquidity transformation without direct, explicit access to public backstops. The lack...

This paper presents an early warning system for predicting banking crises specifically tailored to developed small open economies. The model considers two sources of financial instability: Domestic macro-financial imbalances and exposure to foreign banking systems with high crisis risk. Exposure...