Inspired by the extensive criticisms against the textbook fractional reserve theory, this paper revisits the mechanics …

economy, namely a demand shock and a shock to bank capital. The main findings of the paper are as follows: i) Impulse …-response analysis shows that in response to a shock to bank capital, banks boost capital ratios by reducing their relative exposure to …) Historical shock decomposition analysis shows that bank capital shocks have contributed to increasing capital ratios since the …

changes in the policy rate as well as macro-prudential regimes in the event of a climate or credit-driven financial shock …

, or fiscal theory of the price level properties. …