This paper addresses the trade-off between additional loss-absorbing capacity and potentially higher bank risk-taking associated with the introduction of the Basel III Leverage Ratio. This is addressed in both a theoretical and empirical setting. Using a theoretical micro model, we show that a...

This paper proposes a tractable way to incorporate lending standards ("credit qualification thresholds") into macro models of financial frictions. Banks can reject borrowers whose risk is above an endogenous threshold at which no lending rate sufficiently compensates banks for the borrowers'...

We provide evidence that a weak banking sector has contributed to low productivity growth following the European sovereign debt crisis. An unexpected increase in capital requirements for a subset of Portuguese banks in 2011 provides a natural experiment to study the effects of reduced bank...

Loan loss provisions in the euro area are negatively related to GDP growth, i.e., they are procyclical. Loan loss provisions tend to be more procyclical at larger and better capitalized banks. The procyclicality of loan loss provisions can explain about two-thirds of the variation of bank...

Since the global financial crises, many countries have implemented macroprudential policies with the aim to render the financial system more resilient to shocks and limit the procyclicality of the financial system. We present theoretical and empirical evidence on the effectiveness of...

We examine, conditional on structural shocks, the macroeconomic performance of different countercyclical capital buffer (CCyB) rules in small open economy estimated medium scale DSGE. We find that rules based on the credit gap create a trade-off between the stabilization of fluctuations...

I add a moral hazard problem between banks and depositors as in Gertler and Karadi (2009) to a DSGE model with a costly state verification problem between entrepreneurs and banks as in Bernanke et al. (1999) (BGG). This modification amplifies the response of the external finance premium and the...

We examine the relation between capital and liquidity creation. This issue is interesting because of the potential impact on liquidity creation from tighter capital requirements such as those in Basel III. We perform Granger-causality tests in a dynamic GMM panel estimator framework on an...

This paper conducts the first empirical study of the bank balance sheet channel using data on discouraged and informally rejected firms in addition to information on the formal loan granting process. I take advantage of a unique survey data on the credit experience of firms in 8 economies that...

This paper evaluates the impact of the March 2020 European Central Bank recommendation that banks do not pay dividends or buy back shares on their market values. It documents a causal negative impact on bank share prices of around 7% during the two weeks following its announcement. The...