Failing to account for joint dynamics of credit and asset prices can be hazardous for countercyclical macroprudential policy. We show that composite financial cycles, emphasising expansions and contractions common to credit and asset prices, powerfully predict systemic banking crises. Further,...

In this paper we apply the Early Warning System methodology to ten Central and Eastern European Countries to find useful sets of indicators which could predict macroeconomic and financial imbalances. We argue that finding such indicators is crucial in the current monetary policy framework...

This paper uses Hyman P. Minsky’s approach to analyze the current international financial crisis, which was initiated by problems in the American real estate market. In a 1987 manuscript, Minsky had already recognized the importance of the trend toward securitization of home mortgages. This...

While the unfolding financial turmoil has involved new elements, more fundamental elements have remained the same. New elements include structured credit, the originate-to-distribute business model and the tri-party repurchase agreement. The recurrence of crises reflects a basic procyclicality...

Crises are triggered by the inherent uncertainty of the capitalist system. We represent this uncertainty in an open economy real business cycle model of the UK by including non-stationary productivity shocks. A random sequence of good or bad shocks will accumulate, producing euphorias and...

This paper studies the links between financial soundness indicators and financial crisis episodes controlling for several macroeconomic and fiscal variables in 20 OECD countries. We focus our attention on aggregate capital adequacy, asset quality and bank profitability indicators compiled by the...

In 2021, macroprudential authorities of the European Union (EU) and European Economic Area (EEA) countries adopted emergency macroprudential policy relaxation measures to address the impact of the COVID-19 pandemic crisis. It was the first widespread and almost simultaneous use of...

Financial instability and liquidity management by banks is often the most debated topic in the area of monetary economics. This study examines an emerging economy's banking system and contributes to the evolving body of literature on the topic of banks' borrowing behaviour during financial...

This paper shows that a central bank can more efficiently mitigate economic crises when it broadens eligibility for its discount facility to any safe asset or solvent agent. We use difference-in-differences panel regressions and emulate crises by studying how defaults of banks and...