This paper provides some general lessons for the design of countercyclical capital buffers. Its main empirical contribution is to analyse conditioning variables which could guide the build-up and release of capital. A major distinction for countercyclical capital schemes is whether conditioning...

The effectiveness of market discipline -- the strong built-in incentives that encourage banks and financial systems to operate soundly and efficiently -- commands much attention today, particularly in light of recent accounting scandals. As government discipline, in the form of regulation, seems...

The unfolding financial turmoil in mature economies has prompted the official and private sectors to reconsider policies, business models and risk management practices. Regardless of its future evolution, it already threatens to become one of the defining economic moments of the 21st century....

This paper argues that financial imbalances can build up in a low inflation environment and that in some circumstances it is appropriate for policy to respond to contain these imbalances. While identifying financial imbalances ex ante can be difficult, this paper presents empirical evidence that...

In the economic environment that has been emerging over the last couple of decades, it is more likely that the occasional build-up of financial imbalances, typically in the form of unsustainable credit and asset price booms, will occur against the background of low and stable inflation, posing a...

A proper understanding of central bank operations in response to the recent financial turmoil and of their implications for the monetary policy stance and for market functioning calls for an understanding of operating frameworks. And yet, not only are these the least familiar aspect of monetary...

The strength of housing markets around the world has helped to cushion the recent slowdown in global economic activity. How long should we expect this to continue? A sample of industrialised countries covering three decades allows us to explore this question through an analysis of major peaks in...

We examine in a unified framework three recent perspectives on country risk=debt intolerance, original sin, and currency mismatches. We find statistical evidence supporting aspects of all three, though the strength of that support varies considerably across hypotheses and a number of open...

Historically, unusually strong increases in credit and asset prices have tended to precede banking crises. Could the current crisis have been anticipated by exploiting this relationship? We explore this question by assessing the out-of-sample performance of leading indicators of banking system...