Why do some banks react to deregulation by expanding geographically while others do not? This paper examines this question using exogenous variation in locally non-diversifiable risk that banks face in their home state. As a measure of locally non-diversifiable risk we use data on damages...

Fluctuations in the aggregate balance sheets of financial intermediaries provide a window on the joint determination of asset prices and macroeconomic aggregates. We document that financial intermediary balance sheets contain strong predictive power for future excess returns on a broad set of...

This paper investigates the heterogeneous impact of monetary policy shocks on financial intermediaries. I distinguish between traditional banks and shadow banks based on their ability to raise debt and equity funding. The functional form for both intermediaries imposes no constraints ex ante,...

Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the cycle. With forward-looking banks, lending cycles, credit booms and busts, or suppressed and highly fragile bank systems can emerge, depending on the magnitude of liquidity risks....

This paper reviews the state of confidence and trust in the Netherlands, with special attention to the financial sector. An attempt has been made to identify the factors that determine individual trust and confidence and to uncover connections between the various variables. Based on surveys over...

The interplay between banks and the macroeconomy is of key importance for financial and economic stability. We analyze this link using a Factor Augmented Vector Autoregressive Model (FAVAR) which extends a standard VAR for the U.S. macroeconomy with a set of factors summarizing conditions in the...

Shocks in the financial sector caused the great recession of 2008 and pulled down the real economy. To implement financial dynamics in a stylized DSGE-framework we use behavioral elements in expectations to produce waves of bull and bear cycles in the financial intermediation process, that have...

Central bank announcements have strong effects on interest rates, but small or even counterintuitive effects on economic expectations. Based on tick-by-tick futures prices on bonds and stock prices, I confirm these seemingly puzzling results for the euro area and provide evidence that they are...

We analyze differences in consumption and wealth that arise because of different degrees of rationality of households. In particular, we use a standard New Keynesian model and let a certain fraction of households be fully rational while the other fraction possesses less cognitive ability. We...

The estimation of dynamic term structure models (DTSMs) turns out to be challenging in the presence of a small sample. It is exacerbated if the sample is characterized by a prolonged period of low interest rates near a time-varying effective lower bound. These challenges all weigh heavily when...