We propose a theory of bank behaviour under capital requirements that accounts for both risk-shifting incentives and debt overhang considerations. A key result is that the bank's lending response to an increase in the requirement need not be negative. The sign and the magnitude of the response...

Liquidity lines between central banks are a key part of the international financial safety net. In this review article, we lay out some of the economic questions that they pose. Research has provided answers to some of these questions, but many more require further research

This paper uses transaction-level data on the universe of traded UK inflation swaps to characterize who buys and sells inflation risk, when, and with what price elasticity. This provides measures of expected inflation cleaned from liquidity frictions. We first show that this market is segmented:...