We analyze the transmission of an interest rate shock to households in the context of a stress-test module. We examin standard mitigants, such as delays due to a future interest-rate-reset-date, tax deduction of the interest paid on mortgages, the amortization of different mortgage types and...

How should policymakers respond to uncertainty shocks? To analyze the macroeconomic effects of uncertainty shocks associated with various conventional structural shocks, we develop a New Keynesian model with financial frictions and time-varying volatility, which features a...

The recent financial crisis has stimulated theoretical and empirical research on the propagation mechanisms underlying business cycles, in particular on the role of financial frictions. Many issues concerning the interactions between banking and monetary policy forced policy makers to redefine...

Canada's Large Value Transfer System (LVTS) is in the process of being replaced by a real-time gross settlement (RTGS) system. A pure RTGS system typically requires participants to hold large amounts of intraday liquidity in order to settle their payment obligations. Implementing one or more...

We estimate the macroeconomic effects of changes in loan-to-value limits using an approach that involves the cross-sectional loan-to-value distribution and does not require that a limit is actually in place. We show that the effects are asymmetric and non-linear as tighter limits constrain a...

This paper analyzes the trade-off between financial stability and credit rationing that arises when increasing capital requirements. It extends the Stiglitz-Weiss model of credit rationing to allow for bank default. Bank capital structure then matters for lending incentives. With default and...

The model of Stiglitz and Weiss (American Economic Review, Vol. 71, No. 3, 1981) is the seminal analytical work on credit rationing. However, in a recent paper, Arnold and Riley (American Economic Review, Vol. 99, No. 5, 2009) claim that the distributional assumption on which that model's main...

We integrate a banking sector in a standard New-Keynesian DSGE model, and examine how government policies to recapitalize banks after a crisis affect the supply of credit and the transmission of monetary policy. We examine two types of recapitalizations: immediate and delayed ones. In the steady...

It is widely perceived that the supply of mortgages, especially since the extensive liberalization of the mortgage market of the 1980s, has had implications for the housing market in the Netherlands. In this paper we introduce a new method to estimate a credit condition index (CCI). The CCI...

In this paper we present a new data set on bank credit in four categories: home mortgages, consumer credit, bank loans to non-bank financials, and loans to non-financial business, for 74 economies over 1990–2013. We offer a full description of sources and methods of data collection and...