Procyclicality is an inherent feature of the real and especially the financial sector of an economy, which has been highlighted by the recent crisis. Due to procyclicality, banks are transformed from mitigation mechanisms to amplifiers of changes in economic activity potentially affecting...

This paper provides an overview of the history of banking transition (1989-2006) in 13 CEE countries – with particular emphasis on four relatively large Balkan countries (Bulgaria, Croatia, Romania, Serbia and Montenegro). Two “banking reform waves” are distinguished, salient features of...

TThis study uses the distribution free approach to investigate cost efficiency in a panel of Greek banks over 1993-1999, a period characterized by major changes in the banking sector brought about by gradual financial deregulation. These reforms were supposed to provide an opportunity to Greek...

This paper evaluates the role of inflation-forecast heterogeneity in US monetary policy making. The deviation between private and central bank inflation forecasts is identified as a factor increasing inflation persistence and thus calling for a policy reaction. An optimal policy rule is derived...

We find evidence that banks target return on equity (RoE) and make active use of leverage to affect the speed of adjustment towards RoE targets. That holds for both the pre- and post-2007 periods and especially for banks that tend to operate with above median leverage among their peer group. As...

This paper investigates the inter-linkages between financial stability and fiscal policy. It analyzes the effect of selected financial stability indicators on the probability of future debt deterioration, controlling for several macroeconomic variables. We find significant evidence that a...

This paper studies the links between of financial soundness indicators and financial crisis episodes controlling for several macroeconomic and fiscal variables in 20 OECD. We focus our attention on aggregate capital adequacy, asset quality and bank profitability indicators compiled by the IMF....

The paper provides an overview of the sovereign debt crisis. I first consider the build-up of the crisis. I then discuss policy choices when a financial crisis erupts and assess the adjustment processes in the crisis countries, including alternatives to policies of austerity. Finally I take up...

The nature of fiscal policies was changed dramatically by the creation of the Eurozone. While prior to the start of the Eurozone, national governments were sovereign in that they could back up the issue of debt by the issue of money, they lost this sovereignty in the Eurozone. This had dramatic...

The earlier 2007/8 financial crisis generated the main lessons for monetary policy, notably that price stability does not necessarily guarantee financial stability. Nevertheless, the on-going Eurozone crisis has pointed to further lessons, notably that a single currency covering diverse states...