This paper uses a simple money demand and supply framework to estimate the impact of quantitative easing (QE) on asset prices and nominal spending. We use standard money accounting to try to establish the impact of asset purchases on broad money holdings. We show that the initial impact of £200...

How well equipped are today's macroprudential regimes to deal with a re-run of the factors that led to the global financial crisis? We argue that a large proportion of the fall in US GDP associated with the crisis can be explained by two factors: the fragility of financial sector — represented...

We present a framework for measuring the evolution of risks to financial stability over the financial cycle, which we apply to the United Kingdom. We identify 29 indicators of financial stability risk, drawing from the literature on early warning indicators of banking crises. We normalise and...

We estimate the effect of changes in microprudential regulatory capital requirements on bank capital ratios and bank lending. We do so by running panel regressions using a rich new data set, exploiting variation in individual bank capital requirements in the United Kingdom from 1990-2011. There...

How can macroeconomic tail risks originating from financial vulnerabilities be monitored systematically over time? This question lies at the heart of operationalising the macroprudential policy regimes that have developed around the world in response to the global financial crisis. Using...

Legacy asset overhang and incentive to shift risk due to government guarantees can both affect bank capital issuance and lending decisions. We show that such frictions lead to ambiguous predictions on how one should expect a bank to react to a change in capital requirements. One sustained...

We investigate the role of private sector credit in shaping the severity of recessions. Using a sample of 130 downturns in 26 advanced economies since the 1970s, we assess whether the growth or level of credit is the better predictor of the severity of a recession. In addition to GDP we examine...

Using a panel dataset of 26 advanced economies over the five decades preceding the Covid crisis, we show that inequality rises following recessions and that rapid credit growth in the run up to a downturn exacerbates that effect. A one standard deviation credit boom leads to a 40% amplification...

This paper focuses on what has been learned from the past decade of previously unconventional monetary policy measures and the emerging lessons from the effects of monetary policy responses to the Covid shock. The paper explores two observations from recent quantitative easing (QE) policies in...

Recent results suggesting that monetary financing is more expansionary than bond financing in standard New Keynesian models rely on a duality between policy rules for the rate of money growth and the short-term bond rate, rather than a special role for money. We incorporate two features into a...