I show how capital regulations, by imposing a low or zero cost on undrawn credit lines, can lead to ex post … misallocation of credit across different borrowers following a market shock. This effect is in addition to the liquidity impact of … credit line drawdowns highlighted by previous literature. In a theoretical model, I examine why capital regulations give the …

rates if the credit risk of the borrower improves with time. On another side the proposed model allows the lender not to … give the loan if the company is bankrupt or even when there is a significant deterioration of its credit risk. As a result …

The consensus that changes in the supply of credit were irrelevant to making monetary policy decisions existed among … supply of credit, however, played an important role in the recent U.S. financial crisis. This paper explores the extent to … which policymakers should consider changes in the supply of credit when making forecasts and monetary policy decisions. More …

deregulation and estimate a large impact of this credit boom on asset prices. However, this direct effect---the focus of most … academic and policy work---is only half the story. As theory predicts, we find that unconstrained speculators front …