This paper examines the response of US stock returns to Federal Funds rate (FFR) surprises between 1989 and 2012, focusing on the impact of the recent financial crisis. We find that outside the crisis period, stock prices increased as a response to unexpected FFR cuts. State dependence is...

The present study investigates theoretically the lending responses of government-owned and private banks in the event of unexpected financial shocks. Our model predicts that public banks provide more loans to the real sector during times of crisis, compared to private banks which cut down on...

We investigate how the lending activities abroad of a multinational bank’s local and hub affiliates have been affected by funding difficulties during the financial crisis. We find that affiliates’ local deposits and performance have been stabilizing loan supply. By contrast, relying on...

After August 2007 the plumbing system that supplied banks with wholesale funding, the interbank market, failed because toxic assets obstructed the pipes. Banks were forced to squeeze liquidity in a “lemons market” or to ask for liquidity “on tap” from central banks. This paper...

Following the debate on the role of credit risk transfer (CRT) in exacerbating the 2007–2009 crisis, this paper investigates the usage and effects of loan sales, securitization, and credit derivatives in U.S. commercial banks over the last decade, with special emphasis on the financial crisis....

This paper examines whether the rescue measures adopted during the global financial crisis helped to sustain the supply of bank lending. The analysis proposes a setup that allows testing for structural shifts in the bank lending equation, and employs a novel dataset covering large international...

This paper develops a model of banking frictions and banking risk. As a sort of systemic risk, changes in banking risk lead to fluctuations in aggregate economic activity. We decompose the macroeconomic effect of a banking risk shock into a pure default effect and a risk-aversion effect when...

An ICAPM which includes bank credit growth as a state variable explains 94% of the cross-sectional variation in the average returns on the 25 Fama–French portfolios. We find compelling evidence that bank credit growth is priced in the cross-section of expected stock returns, even after...

We examine effects of government actions and related accounting policies on the corporate bond market implied by changes in relations between aggregate bond returns and cash flow and discount rate news. We capture the influence of risk by partitioning bonds into investment and speculative...

We show how to use asset market data to restrict the admissible region for the first-order autocorrelation of the stochastic discount factor (SDF). We interpret this statistic as a measure of a model’s economic time variation across two periods. Estimating bounds for nominal and real SDFs at...