Credit spreads rise after a monetary policy tightening, yet spread reactions are heterogeneous across firms. Exploiting information from a panel of corporate bonds matched with balance sheet data for U.S. non-financial firms, we document that firms with high leverage experience a more pronounced...

This paper examines the evolving importance of common global components underlying domestic financial conditions. It develops financial conditions indices (FCIs) that make it possible to compare a large set of advanced and emerging market economies. It finds that a common component, 'global...

The crisis has highlighted the importance of setting up macro-prudential oversight frameworks, having effective macro-prudential instruments in place to be called upon to mitigate growing financial imbalances as needed. We develop a new approach using the euro area Bank Lending Survey to assess...

We analyze the effects of dividend taxation in a general equilibrium business cycle model with an occasionally-binding investment credit limit. Permanent dividend tax reforms distort capital investment decisions in the binding long-run equilibrium, but are neutral otherwise. Temporary unexpected...

The structural model in this paper proposes a micro-founded framework that incorporates an active banking sector with an oil-producing sector. The primary goal of adding a banking sector is to examine the role of an interbank market on shocks, introduce a national development fund and study its...

Credit is key to support healthy and sustainable economic growth but excess aggregate credit growth can signal the build-up of imbalances and lead to systemic financial crisis. Hence, monitoring the credit cycle is key to identifying vulnerabilities, particularly in emerging markets, which tend...

This paper revisits the stabilization role of public banks and analyzes whether weak public finances may hinder this role. During the global financial crisis (GFC), public banks were widely used to counter the private credit crunch and prop up the economy. Using cross-country bank-level data for...

Better “financial soundness” of banks could help mitigate the volatility of financial cycles by reducing banks' risk exposure. But trying to improve financial soundness in the midst of a downturn can do the opposite—further aggravating the contraction of credit. Consistent with this...

In this paper, we develop a model incorporating the impact of financial inclusion to study the implications of introducing a retail central bank digital currency (CBDC). CBDCs in developing countries (unlike in advanced countries) have the potential to bank large unbanked populations and boost...

This paper studies whether bank ownership influenced lending behavior during the COVID-19 shock. It finds that, similar to previous episodes of financial distress, foreign banks appear to have played a shock-transmitting role, as there was a sharp slowdown in lending by foreign banks’...