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trillion. The effect of reserve balances in simple macroeconomic models often comes through the money multiplier, affecting the … money. Nevertheless, some academic research and many textbooks continue to use the money multiplier concept in discussions … the standard multiplier model or the bank lending channel. In particular, if the level of reserve balances is expected to …
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The role of bank capital as a propagation channel of shocks is strongly pronounced in recent macroeconomic models. In this paper, we show how the evolution of bank capital depends on the share of non-state-contingent assets in banks’ balance sheets and present the consequences for...
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We investigate the transmission of changes in bank capital requirements and supranational monetary policy, and their interaction effect, on euro area bank lending and lending rates. Our results show that - for weakly capitalized banks - increases in capital requirements are in the short-run...
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We introduce banks, modeled as in Diamond and Rajan (JoF 2000 or JPE 2001), into a standard DSGE model and use this framework to study the role of banks in the transmission of shocks, the effects of monetary policy when banks are exposed to runs, and the interplay between monetary policy and...
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