This paper investigates the complementarity between the different macroprudential policies to contain bank systemic risk. We use a newly updated version of the IMF survey on Global Macroprudential Policy Instruments (GMPI). By disentangling the aggregate macroprudential policy index, we assess...

Has economic research been helpful in dealing with the financial crises of the early 2000s? On the whole, the answer is negative, although there are bright spots. Economists have largely failed to predict both crises, largely because most of them were not analytically equipped to understand...

After the destructive impact of the global financial crisis of 2008, many believe that pre-crisis financial market regulation did not take the "big picture" of the system suffciently into account and, subsequently, financial supervision mainly "missed the forest for the trees". As a result, the...

In the wake of the global financial crisis that erupted in 2008, there has been extensive commentary and regulatory focus on the 'Too Big to Fail' issue. In this paper, we survey the proposed solutions and regulatory initiatives that have been undertaken. We conduct a longitudinal analysis of...

This paper builds on existing microprudential and macroprudential early warning systems (EWSs) to develop a new, hybrid class of models for systemic risk, incorporating the structural characteristics of the financial system and a feedback amplification mechanism. The models explain financial...

From the financial supervisor's point of view, an early warning system involves an ex-ante approach to regulation, targeting to predict and prevent crises. An efficient EWS allows timely ex-ante policy action and can reduce the need for ex-post regulation. This paper builds on existing...

This paper builds on existing microprudential and macroprudential early warning systems (EWSs) to develop a new, hybrid class of models for systemic risk that incorporates the structural characteristics of the financial system and a feedback amplification mechanism. The models explain financial...

We develop a theoretical model examining the financial stability policy of a central bank serving as both the lender of last resort and the regulator of the financial system. The model accommodates the possibility of financial contagion through interbank market linkages, and adverse feedback...

Contingent convertible capital (CoCo) is a debt instrument that converts to equity or is written off if the issuing bank fails to meet a distress threshold. The conversion increases the issuer's loss-absorption capacity, but results in wealth transfers between CoCo holders and shareholders,...

This paper studies the significant variation in the cross-section of standalone and systemic risk of large banks during the recent financial crisis to identify bank specific factors that determine risk. We find that systemic risk grows with bank size and is inversely related to bank capital, and...