We report results of an Internet experiment designed to test the theory of informational cascades in financial markets (Christopher Avery and Peter Zemsky, 1998). More than 6,400 subjects, including a subsample of 267 consultants from an international consulting firm, participated in the...

This article provides a simulation on how the countercyclical capital buffer designed in the Basel III package could impact on bank lending. It finds that the buffer could help to reduce credit growth during booms and attenuate the credit contraction once it is released. This would help to...

We report results of an internet experiment designed to test the theory of informational cascades in financial markets (Avery and Zemsky, AER, 1998). More than 6000 subjects, including a subsample of 267 consultants from an international consulting firm, participated in the experiment. As...

AbstractThe following sections are included:IntroductionData and MethodologyFrequency-based filter analysisTurning-point analysisCharacterizing Cycles in Individual SeriesFrequency-based filter analysis: Short-term and medium-term cyclesTurning-point analysis: Short-term and medium-term...

Ideally, early warning indicators (EWI) of banking crises should be evaluated on the basis of their performance relative to the macroprudential policy maker’s decision problem. We translate several practical aspects of this problem — such as difficulties in assessing the costs and benefits...

Traditional economic models have had difficulty explaining the non-monotonic real effects of credit booms and, in particular, why they have predictable negative after-effects for up to a decade. We provide a systematic transmission mechanism by focusing on the flows of resources between...

In response to the COVID-19 shock, many central banks in emerging market economies have launched local currency bond purchase programmes to address bond market dislocations, signalling that they were willing to take the role of a buyer of last resort. Local currency bond yields fell...

In this paper we show that a deposit insurance can increase the probability of systematic banking crisis, even though it is optimally designed and does not induce any moral hazard. This is driven by the possibility of contagious bank runs. We prove that contagion only occurs if the correlation...