Grossman, Richard, (2016), “Banking Crises”, Centre for Economic Policy Research, Μay Financial crises have been a common feature of the economic landscape for more than two centuries. The chapter defines banking crises, considers the type of costs that they impose, and outlines the most common causes of banking crises during the past 200 years. The remainder of the chapter considers five distinct historical periods: the nineteenth century, when the “boom-bust” pattern …Read More

De Grow, Paul, Ji, Yuemei, (2016), “Flexibility versus Stability: A difficult trade-off in the eurozone”, CEPS, 29 Αpril Optimal currency area (OCA) theory has been influential in pushing eurozone countries towards structural reforms to make product and labour markets more flexible. The underlying assumption of the OCA prescription for structural reform is that asymmetric shocks are permanent. However, when shocks are temporary it does not follow that more flexibility is the answer. …Read More

Altavilla, Carlo, Pagano, Marco, Simonelli, Saverio, (2016), “Bank Exposures and Sovereign Stress Transmission”, Centre for Economic Policy Research, Μay Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the causes and effects of banks’ sovereign exposures during and after the euro crisis. First, in the vulnerable countries, the publicly owned, recently bailed out and less strongly capitalized banks reacted to sovereign stress by increasing their domestic sovereign holdings …Read More

Elias, Aptus, Gersbach, Hans, Volker, Britz, (2016), “On the Economics of Crisis Contracts”, Centre for Economic Policy Research, Μay We examine the impact of so-called “Crisis Contracts” on bank managers’ risk-taking incentives and on the probability of banking crises. Under a Crisis Contract, managers are required to contribute a pre-specified share of their past earnings to finance public rescue funds when a crisis occurs. This can be viewed as a retroactive tax that …Read More