We integrate banks and the coexistence of bank and bond financing into an otherwise standard New Keynesian framework. There are two policy-makers: a central banker, who can decide on short-term nominal interest rates, and a macroprudential policy-maker, who can vary aggregate capital...

Based on a dynamic panel data analysis of South-Eastern European (SEE) banks over 10-year period, this paper explores risk-taking implications of changes in capital buffers. Its findings support the capital buffer theory. Firstly, banks increase their asset riskiness within the capital buffers...