The Great Depression is infamous for banking panics, which were a symptomatic of a phenomenon that scholars have labeled a contagion of fear. Using geocoded, microdata on bank distress, we develop metrics that illuminate the incidence of these events and how banks that remained in operation...

We study the risk-taking channel of monetary policy in Bolivia, a dollarized country where monetary changes are transmitted exogenously from the US. We find that a lower policy rate spurs the granting of riskier loans, to borrowers with worse credit histories, lower ex-ante internal ratings, and...

In this paper we present a methodology of model-based calibration of additional capital needed in an interconnected financial system to minimize potential contagion losses. Building on ideas from combinatorial optimization tailored to controlling contagion in case of complete information about...

This paper shows how the combined endogenous reaction of banks and investment funds to an exogenous shock can amplify or dampen losses to the financial system compared to results from single-sector stress testing models. We build a new model of contagion propagation using a very large and...

This paper investigates the effects of contagion in interbank lending networks. I introduce a new measure based on the harmonic distance of Acemoglu et al. (2015b) and, motivated by their theoretical results, compare it to well-known centrality measures already applied in the systemic risk...

We identify the effects of monetary policy on credit risk-taking using a unique dataset covering the population of corporate borrowers in Norway. We find that a lower benchmark interest rate (interbank rates or overnight rates) induces the average bank to grant more loans to risky firms. We also...

This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on the interbank market. Using a simple network structure, it shows that if there is a non-zero bailout probability, banks can significantly increase the expected repayment of...

The future of banking will be a return to the origin: increased lending activity, focus on SMEs and the importance of Relationship banking (RB). A review of the literature of the last thirty years shows the success elements to develop the RB even in the large banks operating internationally: the...

The Great Depression is infamous for banking panics, which were a symptomatic of a phenomenon that scholars have labeled a contagion of fear. Using geocoded, microdata on bank distress, we develop metrics that illuminate the incidence of these events and how banks that remained in operation...

This paper explains why banks derive a benefit from being highly interconnected. We show that when banks are protected by government guarantees they can significantly increase their expected returns by channeling funds through the interbank market before these funds are invested in real assets....