1,721,004 research outputs found
Banking competition and welfare
Full text linkWe develop a simple general equilibrium model in which investment in a risky technology is subject to moral hazard and banks can extract market power rents. We show that more bank competition results in lower economy-wide risk, higher social welfare, lower bank capital ratios, more efficient production plans and Pareto-ranked real allocations. Perfect competition supports a second best allocation and optimal levels of bank risk and capitalization. These results are at variance with those obtained by a large literature that has studied a similar environment in partial equilibrium, they are empirically relevant, and carry significant implications for policy guidance
Monetary Trade-offs: Stability vs. Renewables
Full text linkThis paper analyzes the spillovers of US monetary policy on renewable energy consumption (CRE) through financial stability channels, particularly through uncertainty amplification that reallocates resources from innovative green sectors. Using monthly data from January 1990 to June 2025, a VAR(4) model with Cholesky identification shows that federal funds rate hike shocks reduce CRE by up to -0.50% in the near term, simultaneously dampening volatility (-0.45 VIX index points) and inflation (-0.22%), but increasing uncertainty. Robustness checks, including sign restrictions, threshold VARs for nonlinearity, CRE disaggregation, and fiscal controls, confirm state-dependent effects moderated by financial development. Extending Cheng and Lin (2024), we highlight central bank dilemmas in green transitions, arguing for the need for targeted tools
Does the bank risk concentration freeze the interbank system?
Full text linkProbably, one test of the stability of the banking system is to evaluate how risky assets are distributed across banks’ portfolios and the implications for the contagion via interbank relations. This paper explores theoretically a bank sector with risks concentration and the functioning of interbank markets. It employs a simple model where banks are exposed to both credit and liquidity risk that suddenly correlate over the business cycle. We show that risk concentration makes interbank market breakdowns more likely and welfare monotonically decreases in risk concentration
Three Essays on Banking Sector Stability: Theoretical Models and Empirical Application
No full textThis thesis consists of three interdependent and
original works on the relation between a single bank risk-taking
behavior and the overall banking sector liquidity in response to
monetary policy and merger waves. A theoretical model explains the
impact of minimum capital requirement on bank risk taking behavior.
Minimum capital, through the effect on the interbank interest rate,
has the perverse effect to increase bank risk taking behavior.
Moreover, minimum capital must increase as the risk-free interest
rate rises. Then, the magnitude of the interest rates to affect
banks behavior is empirically assessed. Finally, a chapter builds up
and tests empirically a model which highlights the relation between
consolidation of banks suppliers of differentiated products and bank risks
Bank Market Structure, Systemic Risk, and Interbank Market Breakdowns
Full text linkThis paper explores theoretically the implications of bank market structure and banking system risks
concentration for the functioning of interbank markets. It employs a simple model where banks are
exposed to both credit and liquidity risk, there is no asymmetric information, no market power, no
friction in secondary markets and deposit contracts are fully contingent. We show that (a) the
concentration of risks induced by changes in bank market structure makes interbank market
breakdowns more likely; (b) welfare monotonically decreases in risk concentration; and (c) risk
concentration and a high probability of interbank market breakdowns can be driven by risk control
diseconomies of scale and scope and increases in financial firms’ size. As banking systems become
more concentrated, improvement of risk control technologies in financial institutions and in regulatory
bodies appear as important as other policies considered in the literature to minimize the probability of
interbank market breakdowns
Emerging Stock Premia: Do Industries Matter?
Full text linkThis paper studies the dynamics of emerging excess returns in a industry-by-industry context. Differently from the recent financial literature, which mainly focuses on “total market indexes”, we perform a standard ex-post empirical analysis aimed at capturing the industries’ contribution to country stock performances. We obtain three key empirical findings. First, at industry level, we confirm the “high performance-high volatile nature” as well as the timevarying component of emerging excess returns. Second, at country level and in a dynamic context, we detect those industries that mainly contribute to the presence of emerging stock
premia. Third, we show that some industries are much more exposed to global factors than others. We argue that these results display relevant implications for portfolio diversification
and reflect consumption smoothing motive
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