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The role of bank capital as a propagation channel of shocks is strongly pronounced in recent macroeconomic models. In this paper, we show how the evolution of bank capital depends on the share of non-state-contingent assets in banks' balance sheets and present the consequences for macroeconomic dynamics. State-contingent securities impact on banks' balance sheets through changes in their returns (and their prices), both of which depend on the current state of the economy. Nonstate-contingent assets are signed before shocks are realized and their repayment is guaranteed. For this reason they insulate banks' balance sheets from recent economic activity in the absence of defaults. Our results show that non-state-contingent assets in banks' balance sheets attenuate the amplification of shocks resulting from financial frictions in the banking sector.

This paper compares the consequences of equity injections into banks with purchases of corporate and government bonds in a financial crisis situation using a New Keynesian model in which non-financial firms predominantly take non-market-based debt from banks instead of issuing securities. Our results show that equity injections into banks are more welfare enhancing than asset purchases following a financial shock located in the banking sector. Equity injections remove the frictions that have initiated the stress and, at the same time, relax borrowing conditions. Outright purchases also increase welfare but lower returns with negative effects on banks' profits, while the effect on asset prices to stabilize banks' balance sheets is of minor importance due to the dominance of non-market-based debt. Furthermore, we demonstrate that the origin of the financial shock matters crucially for the efficacy of measures.

This paper investigates how government bond purchases affect leverage-constrained banks and non-financial firms by utilising a stochastic general equilibrium model. My results indicate that government bond purchases not only reduce non-financial firms' borrowing costs, amplified through a reduction in expected defaults, but also lower banks' profit margins. In an economy in which loans priced at par dominate in banks' balance sheets - as a reflection of the euro area's structure - the leverage constraint of non-financial firms is relaxed while that of banks tightens. I show that the leverage constraint in the non-financial sector plays an essential role in transmitting the impulses of government bond purchases to the real economy.

This paper compares the consequences of equity injections into banks with purchases of corporate and government bonds in a financial crisis situation using a New Keynesian model in which non-financial firms predominantly take non-market-based debt from banks instead of issuing securities. Our results show that equity injections into banks are more welfare enhancing than asset purchases following a financial shock located in the banking sector. Equity injections remove the frictions that have initiated the stress and, at the same time, relax borrowing conditions. Outright purchases also increase welfare but lower returns with negative effects on banks' profits, while the effect on asset prices to stabilize banks' balance sheets is of minor importance due to the dominance of non-market-based debt. Furthermore, we demonstrate that the origin of the financial shock matters crucially for the efficacy of measures.

Aus der Einleitung: "Ökologie zum Anfassen oder zum Angucken" ist das Leitmotiv der Umwelt-Touren, die von der Hamburger Umweltbehörde seit 1986 angeboten werden. In ca. drei Stunden gibt es dort einen allgemeinen Überblick über Hamburger Umweltschutzthemen. Das vorliegende Heft soll die Möglichkeit geben, die Umwelt-Tour eigenständig mit dem Bus oder mit dem Fahrrad zu erfahren. Auch auf Möglichkeiten, Werksanlagen zu besichtigen, wird hingewiesen.

In this paper, we examine the influence of information rigidities concerning the net worth of banks on the real economy over time. In a first part, we show empirically that expectations about the net earnings of banks (as growth of net worth) are truly biased, particularly during the financial crisis. The forecast error of professional investors cannot be attributed to sticky information but rather to noisy information. Investors display a learning behavior with regard to past forecast errors in forming their expectations about future earnings during the crisis. In a second part, by drawing on a New Keynesian general equilibrium model with a banking sector, we demonstrate that, by quantitatively incorporating this type of information updating and expectations formation about the net worth of banks, noisy information can produce a slow recovery compared to a full information rational expectation case.

We analyse the effects of central bank government bond purchases in an estimated DSGE model for the euro area. In the model, central bank asset purchases are relevant in so far as agency costs distort banks' asset allocation between loans and bonds, and households face transaction costs when trading government bonds. Such frictions in the banking sector induce inefficient time-variation in the term premia and allow for a credit channel of central bank government bond purchases. Considering ad hoc asset purchase programmes like the one implemented by the ECB, we show that their macroeconomic multipliers get stronger when the lower bound on the policy rate becomes binding and when the purchasing path is fully communicated and anticipated by the agents. From a more normative standpoint, interest rate policy and asset purchases feature strong strategic complementarities during both normal and crisis times. In an environment when nominal interest rates reach their effective lower bound, optimal monetary policy is to keep the policy rate low for a longer period in time and to engage in asset purchases. Our results also point to a clear sequencing of the exit strategy, first stopping the asset purchases and later raising the policy rate. In terms of macroeconomic stabilisation, optimal asset purchase strategies deliver sizeable benefits and have the potential to largely offset the costs of the lower bound on the policy rate.

We analyse the effects of central bank government bond purchases in an estimated DSGE model for the euro area. In the model, central bank asset purchases are relevant in so far as agency costs distort banks asset allocation between loans and bonds, and households face transaction costs when trading government bonds. Such frictions in the banking sector induce inefficient time-variation in the term premia and open up for a credit channel of central bank government bond purchases. Considering first ad hoc asset purchase programmes like the one implemented by the ECB, we show that their macroeconomic multipliers are stronger as the lower bound on the policy rate becomes binding and when the purchasing path is fully communicated and anticipated by economic agents. From a more normative standpoint, interest rate policy and asset purchases feature strong strategic complementarities during both normal and crisis times. In a lower bound environment, optimal policy conduct features long lower bound periods and activist asset purchase policy. Our results also point to a clear sequencing of the exit strategy, stopping first the asset purchases and later on, lifting off the policy rate. In terms of macroeconomic stabilisation, optimal asset purchase strategies bring sizeable benefits and have the potential to largely offset the costs of the lower bound on the policy rate.