How does the shadow banking system respond to changes in capital regulation of commercial banks? We propose a quantitative general equilibrium model with regulated and unregulated banks to study the unintended consequences of regulation. Tighter capital requirements for regulated banks cause...

This paper studies the lending process in financial systems dominated by banks and examines the role of expectations and fundamentals in explaining banking and balance-of-payments crises. The excessive credit expansion to unprofitable projects that often follows the liberalization of capital...

Motivated by a recognition of the increased vulnerability of the banking sector to the COVID-19 pandemic, we examine market-based systemic risk and connectedness in the banking sector of Gulf Cooperation Council member countries, which include Bahrain, Kuwait, the Kingdom of Saudi Arabia (KSA),...

This paper applied the panel VAR approach and the Impulse Response Functions to investigate the differences in the monetary transmission processes of Islamic and conventional banks using disaggregated bank-level data for Saudi Arabia over the period 2008Q1-2020Q4. Our findings show that: i)...

The G-20 Data Gaps Initiative (DGI), which aimed at addressing the information needs that were revealed by the 2007/2008 global financial crisis, concluded its first phase and started a second phase (DGI-2) with the endorsement of G-20 Finance Ministers and Central Bank Governors in September...

The interplay between banks and the macroeconomy is of key importance for financial and economic stability. We analyze this link using a factor-augmented vector autoregressive model (FAVAR) which extends a standard VAR for the U.S. macroeconomy. The model includes GDP growth, inflation, the...

Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix (2008a) and construct a measure of...

This paper compares four forms of inter-regional financial risk sharing: (i) segmentation, (ii) integration trough the secured interbank market, (iii) integration trough the unsecured interbank market, (iv) integration of retail markets. The secured interbank market is an optimal risk-sharing...

The COVID-19 pandemic is damaging economies across the world including financial markets and institutions in all possible dimensions. Particularly for banks, the pandemic generates multifaceted crisis, mostly through increases in default rates. This is likely to be worse in developing economies...