It is well known that movements in lending rates are asymmetric; they rise quickly and sharply, but fall slowly and gradually. Not known is the fact that the asymmetry is stronger the less developed a country's financial system is. This new fact is here documented and explained in a model with an...

This paper examines the characteristics of the financial system that tend to accentuate the economy's cyclical fluctuations and, on occasion, end up causing asset bubbles and financial crises, like the one that started in 2007 with the US subprime mortgages. The paper discusses, first, some...

This paper defines the special characteristics of the financial cycle of Spain during the period 1995-2016 and investigates to what extend the stability of the banking system attenuates or exacerbates the financial cycle. The findings of these two empirical analyses highlight that the financial...

This paper gives new evidence for the importance of bank suspensions during the Great Depression. I establish that more financially dependent manufacturing industries exhibited steeper declines in output relative to peers. This differential is largest in states that were most affected by banking...

Better “financial soundness” of banks could help mitigate the volatility of financial cycles by reducing banks' risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit. Consistent with this...