Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless", and average growth during these episodes is about a third lower than...

Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless," and average growth during these episodes is about a third lower than...

The recent global financial crisis has ignited a debate on whether easy monetary conditions can lead to greater bank risk-taking. We study this issue in a model of leveraged financial intermediaries that endogenously choose the riskiness of their portfolios. When banks can adjust their capital...

This paper contributes to the debate by showing that the relationship between the monetary policy stance and bank risk taking is more complex than generally believed. Most of the debate so far has focused on how monetary policy easing can induce greater risk taking through a search for yield or...

The financial crisis showed, once again, that neglecting real estate booms can have disastrous consequences. In this paper, we spell out the circumstances under which a more active policy agenda on this front would be justified. Then, we offer tentative insights on the pros and cons as well as...

We revisit the link between bailouts and bank risk taking. The expectation of government support to failing banks creates moral hazard - increases bank risk taking. However, when a bank's success depends on both its effort and the overall stability of the banking system, a government's...

The recent global financial crisis has brought the debate on how interest rates affect bank risk-taking to center stage. Proponents of this new risk-taking channel of monetary policy have argued that the low interest–rate environment in the run-up to the crisis may have created incentives for...

We study the optimal design of a central bank digital currency (CBDC) in an environment where agents sort into cash, CBDC and bank deposits according to their preferences over anonymity and security; and where network effects make the convenience of payment instruments dependent on the number of...