We use a quasi-experimental research design to examine the effect of model-based capital regulation introduced under the Basel II agreement on the pro-cyclicality of bank lending and firms' access to funds during a recession. In response to an exogenous shock to credit risk in the German...

The 20th century consensus regarding the role of a central bank – to maintain price stability was upset by the global financial crisis of 2007-2009. Central banks changed their mode of behavior and new regulatory structures were introduced around the world. In this essay, I examine one of the...