Events surrounding the global financial crisis have brought to light the potential role of monetary policy in precipitating the crisis. Numerous studies on advanced economies have documented a significant negative relationship between interest rates and bank risk-taking. This paper also finds...

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...

How do real interest rates affect financial fragility? We study this issue in a model in which bank borrowing is subject to rollover risk. A bank's optimal borrowing trades off the benefit from investing additional funds into profitable assets with the cost of greater risk of a run by bank...

How do real interest rates affect financial fragility? We study this issue in a model in which bank borrowing is subject to rollover risk. A bank’s optimal borrowing trades off the benefit from investing additional funds into profitable assets with the cost of greater risk of a run by bank...

The demographic transition can affect the equilibrium real interest rate through three channels. An increase in longevity - or expectations thereof - puts downward pressure on the real interest rate, as agents build up their savings in anticipation of a longer retirement period. A reduction in...

The Gulf Cooperation Council countries (GCC) include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Their monetary policy objective is to stabilize the foreign price, i.e., exchange rate instead of the domestic price level, where the nominal interest rate is equalized with the US...