We study the prices that individual banks pay for liquidity (captured by borrowing rates in repos with the central bank and benchmarked by the overnight index swap) as a function of market conditions and bank characteristics. These prices depend in particular on the distribution of liquidity...

We examine the issue of the appropriate selection of macroprudential instruments according to the vulnerabilities identified and the policymakers' objectives using a version of the 3D DSGE model following Mendicino et al. (2020) and Hinterschweiger et al. (2021) calibrated for the euro area. We...

Macroprudential policies should strengthen the banking sector throughout the financial cycle. However, while bank credit growth is used to capture cyclical exuberance and calibrate buffer requirements, it depends on potentially heterogeneous dynamics on the borrower and lender sides. By...

This paper studies how mortgage borrowers and house prices react to a tightening of mortgage limits following a policy change in Ireland in 2015. The policy introduced limits to the loan-to-income and loan-to-value ratios of new mortgages issued. In response to a tightening borrowing constraint,...

We establish basic facts about the external finance premium. Tens of millions of individual loan contracts extended to euro area firms allow studying the determinants of the external finance premium at the country, bank, firm, and contract levels of disaggregation. At the country level, the...

The Great Recession has been characterised by the two stylized facts: the buildup of leverage in the household sector in the period preceding the recession and a protracted economic recovery that followed. We attempt to explain these two facts as an information friction, whereby agents are...

We study the impact of higher bank capital buffers, namely of the Other Systemically Important Institu- tions (O-SII) buffer, on banks' lending and risk-taking behaviour. The O-SII buffer is a macroprudential policy aiming to increase banks' resilience. However, higher capital requirements...

How do near-zero interest rates affect optimal bank capital regulation and risk-taking? I study this question in a dynamic model, in which forward-looking banks compete imperfectly for deposit funding, but households do not accept negative deposit rates. When deposit rates are constrained by the...

We quantify the impact that central bank refinancing o perations a nd f unding f acilities had at reducing the banking sector's intrinsic fragility in the euro area in 2014-2019. We do so by constructing, estimating and calibrating a micro-structural model of imperfect competition in the banking...

Could a monetary policy loosening entail the opposite effect than the intended expansionary impact in a low interest rate environment? We demonstrate that the risk of hitting the rate at which the effect reverses depends on the capitalization of the banking sector by using a non-linear...