How does bank profitability vary with interest rates? We present a model of a monopolistically competitive bank subject to repricing frictions, and test the model's predictions using a unique panel data set on UK banks. We find evidence that large banks retain a residual exposure to interest...

We study the impact of economic uncertainty on the supply of bank credit using a monthly dataset that includes all loan applications submitted by a sample of 650,000 Italian firms between 2003 and 2012. We find that an increase in aggregate uncertainty has three effects. First, it reduces banks'...

Since monetary policy affects risk premiums, and these appear to have a stronger influence on economic activity when they rise than when they fall, temporary monetary expansions may both stimulate the economy and sow the seeds of damaging financial market corrections in the future. We...