We propose a predictor of market bubbles, crashes and corrections that is based on the relationship between the following two ratios: (Market value of the firm compared to its intrinsic value, MV/IV) and the (return on capital of the firm versus its cost of capital, R/C*). We apply the model to...

The use of macro stress tests to assess bank solvency has developed rapidly over the past few years. This development was reinforced by the financial crisis, which resulted in substantial losses for banks and created general uncertainty about the banking sector's loss-bearing capacity. Macro...

Poland underwent a quick transition of the economy, but its housing market and housing policy did not change quick enough. The economic growth that followed the EU accession lead to a rising housing demand, which was fuelled by quite cheap FX denominated mortgages. Those allowed many households...

This paper examines the history and the determinants of bank profits in Italy from 2005-15. We first identify a number of key stylized facts by comparing the income statement of Italian lenders with that of banks in other European countries. The comparison suggests that the profitability gap of...

This paper explores the hypothesis that the sources of economic and financial crises differ from non-crisis business cycle fluctuations. We employ Markov-switching Bayesian vector autoregressions (MS-BVARs) to gather evidence about the hypothesis on a long annual U.S. sample running from 1890 to...

This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks' balance sheets doubled in the course of the 20th century, driven by a sharp rise of...

The global economy changed dramatically ever since the US dollar ascended to the top position in the early 1940s as the world’s main reserve currency. As observed from recent events, the United States is both willing and very capable of taking unimaginable measures to defend American...

We propose a novel empirical approach to inform monetary policymakers about the potential effects of policy action when facing trade-offs between financial and macroeconomic stability. We estimate a quantile vector autoregression (QVAR) for the euro area covering the real economy, monetary...

Financial stability indicators can be grouped into financial stress indicators that reflect heightened spreads and market volatility, and financial vulnerability indicators that reflect credit and asset price imbalances. Based on a panel of euro area countries, we show that both types of...

I estimate a dynamic stochastic general equilibrium (DSGE) model for the United States that incorporates oil market shocks and risk shocks working through credit market frictions. The findings of this analysis indicate that risk shocks play a crucial role during the Great Recession and the...