The recent financial turmoil has underlined the importance of analyzing the link between banks’ balance sheets and economic activity. We develop a dynamic stochastic general equilibrium model in which bank capital mitigates an agency problem between banks and their creditors. As a result, the capital position of banks affects their ability to attract loanable funds and therefore influences the ...

This study examines how the level of financial development in a community affects households’ decisions over how remittance income is spent. My findings suggest that in communities without banks remittances are more likely to be used for productive investments or to purchase assets. Increasing the size of the financial sector in communities with banks present increases the likelihood that remit...

The relaxation of the Glass-Steagall Act (GSA), the Act which separates commercial and investment banking, is currently under debate. Central to this debate is the potential risk reduction of commercial banks due to diversification. This paper, through a thorough and complete examination of the diversification potential, establishes an upper bound of diversification benefits. The results do sup...

In this paper, we analyze the impact of business models on bank stability in 15 EU countries between 2002 and 2011. We represent banks’ business models by the share of non-interest income in total operating income and the share of non-deposit funding in total liabilities. In contrast to the literature, we include in our sample a large number of unlisted banks, which represent the majority of ba...

Nowadays, banks are considered as one of the major components of the financial system of a country and any deficits and malfunction in the banking system will negatively affect the performance of the real sector. Therefore, there is a need for more investigation on the behavior of banks and factors affecting those behaviors in a country. One of the issues that affect the behavior of banks is sy...

A. Model of International Lender’s Response To Liquidity Shocks The objective of my model is to formalize the idea that bank ownership a¤ects the provision of …nancing after a liquidity shock. The key assumption in the model is that owners can control the investment decisions of banks in which they have equity holdings, but arm’s-length lenders cannot. This assumption is motivated by the di¢ cu...

We use portfolios of passive investment strategies to replicate the interest risk of banks’ banking books. The following empirical statements are derived: (i) Changes in banks’ present value and in their net interest income are highly correlated, irrespective of the banks’ portfolio composition. (ii) However, banks’ portfolio composition has a huge impact on the ratio of changes in net interest...

The rhetoric of Islamic banking – exemplified in this opening quote by one of the industry’s most prominent pioneers – is derived from its historical evolution as a model of two-tier silent partnership. In fact, Islamic banks have mimicked conventional bank assets – from receivables to bonds, with credit sale and lease-backed debt instruments. In the meantime, Islamic banks have continued to re...