This paper studies how financial intermediation varies across banks. Bank size is a first-order determinant of banks' capital structure in the cross-section. Largest banks have the lowest capital-to-asset ratio and the lowest ratio of Tier-1 capital against risk-weighted assets. These large...

While conventional monetary policy maintains its role in counteracting inflation, there are doubts that it is sufficient to guard against the risks of financial instability. It has been debated whether monetary policy should lean against the wind, i.e., if central banks should also respond to...

A BMW model is augmented with a credit market affected by banks' balance sheet and used to assess the dynamic performance of an economy in the face of demand and financial shocks under different assumptions about the interactions between monetary and macroprudential policy. We show that the...

The frequencies at which prices and wages are adjusted, interpreted as price and wage flexibility, are key elements in workhorse models used for policy analysis. Yet, there is little evidence regarding the relationship between these two sources of nominal rigidities. Using two large and highly...

This paper considers the interdependence of monetary and macroprudential policy in a New Keynesian business cycle model under the zero lower bound constraint. Entrepreneurs borrow in nominal terms from banks and are subject to idiosyncratic default risk. The realized loan return to the bank...

This paper presents an overview of key proposals formulated by the European Systemic Risk Board (ESRB), the European Banking Authority (EBA) and the European Central Bank (ECB) in the context of the review of the macroprudential policy framework of the European Union (EU), aimed at improving its...

Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, we find that these policies are associated with lower credit growth. These effects are especially significant for micro, small and medium enterprises...

With political constraints on fiscal responses and monetary policy confronting the zero lower bound, policymakers may be tempted to turn to financial deregulation as a tool to stimulate economic growth in a recession, a strategy I label “regulatory stimulus.” This article creates a framework...

We use the two-country euro-area model developed by Quint and Rabanal (2014) to study policymaking in the European Monetary Union (EMU). We focus on strategic interactions: 1) between an EMU-level monetary authority and an EMU-level macroprudential authority, and; 2) between an EMU-level monetary...

The recent Global Financial Crisis (2008-2010) and the accompanying Great Recession (2008-2011) show that the level and the rate of monetary and financial systems integration deployed within the Euro area is not sustainable in the long run. Instead of acting as a buffer against external shocks...