Working papers
Building-up Financial Resilience: The Role of Borrower-based Macroprudential Policies
(working paper: available under request)
Abstract
This paper shows the importance of considering credit supply frictions and collateral constraints in DSGE models to analyze the effectiveness of Borrower-Based Macroprudential (BBM) policies. Empirical evidence, estimated using a state-dependent pannel local projection model, suggests that both household indebtedness and bank vulnerabilities amplify financial shocks, with their interaction further exacerbating this effect. A non-linear DSGE model is built to capture this empirical evidence and is used to analyze the role of BBM policies in the broad economy. Additionally, the paper explores the interaction between BBM policies and Quantitative Easing (QE), noting that BBM policies can reduce the effectiveness of QE in mitigating financial distress. The analysis also suggests that smoother activation of BBM policies can lower implementation costs during periods of financial stress. Overall, the analysis suggests that BBM policies should focus on preventing financial distress rather than substantially reducing household indebtedness.
This paper was presented at:
VII Workshop of the Spanish Macroeconomics Network
Banco de España - Seminar series 2025
Monetary policy tightening and Macroprudential Policy with Caterina Mendicino, Kalin Nikolov, Valerio Scalone
(working paper: available under request)
This paper analyzes the side effects of monetary policy tightening on financial stability through the lens of a DSGE model where banks and households endogenously default. We find that a combination of borrower- and capital-based macroprudential policies can mitigate these side effects and improve welfare. More specifically, structurally tighter capital requirements and loan-to-value (LTV) caps improve financial stability by reducing the likelihood of default by banks and households. However, tighter structural policies reduce access to credit, triggering a negative effect on welfare. Time-varying policies, such as counter-cyclical capital buffers (CCyB) and adjustable LTV caps, are able to mitigate ex-post adverse effects, allowing for less tight optimal structural policies and thus significantly improving welfare. Finally, we find that the effects of the CCyB are highly state-dependent. The releases support credit availability when banks are strong, but the increase in risk could offset their counter-cyclical effects if banks are fragile.
This paper was presented at:
European Central Bank - DGMF seminar series 2025
Banco de España - Seminar series 2025
From risk to buffer: Calibrating the positive neutral CCyB rate with Mara Pirovano, Valerio Scalone
This paper proposes a novel methodology to calibrate the Countercyclical Capital Buffer (CCyB), with particular focus on the positive neutral CCyB (PN CCyB) rate. It implements a Risk-to-Buffer approach in both a DSGE and a macroeconomic time series setting. The methodology consists in estimating the amplification of adverse shocks triggered by different levels of systemic risk, and calibrating the CCyB to offset the corresponding amplification effect. In particular, the PN CCyB is calibrated to mitigate the macroeconomic amplification of shocks that occur when systemic risk is neither subdued nor elevated. The flexibility of the approach, regarding the choice of modeling tools, the selection of risk levels, and the identification of state variables and exogenous shocks, makes it particularly well suited to national specificities and policymakers’ preferences.
Work in progress
Macroprudential Policies in Vulnerable Open Economies with Jesper Linde and Roland Meeks
A Structural Extension of the Synthetic Control Method with Emiliano Toni and Jakub Mistak
How Do Banks Weather Uncertainty? The Role of Capitalization with Hannah Hempel and Emiliano Toni
Evaluating uncertainty measures: an empirical assessment with Jesus Vazquez
Published papers
Learning from news - Journal of Macroeconomics (2025) with Jesús Vázquez (Link)
Quality-of-capital news versus TFP news - Economic modeling (2023) with Jesús Vázquez (Link)
Interpreting Structural Shocks and Assessing their Historical Importance - The B.E. Journal of Macroeconomics (2022), with Jesús Vázquez (Link )