AbstractIn February 2019, the Journal of Money, Credit and Banking (JMCB) turned 50. The editors of the journal decided to celebrate this anniversary with two conferences, reflecting the two broad areas that the journal covers. A first conference on “Financial intermediation, regulation and economic policy” was held at the European Central Bank in Frankfurt/Germany on March 28–29, 2019, and addressed topics in the credit and financial intermediation fields. A second conference addressed topics in the macro‐economic and monetary fields, and took place at the Federal Reserve Bank of New York on May 30–31, 2019. This Special Issue displays the best contributions to the first conference. The contributions to the second celebratory conference are published in a separate Special Issue.

In this chapter we present a comprehensive review of systemic risk in banking, as the primary ingredient for understanding financial crises that have severe adverse effects on the macroeconomy (such as the Great Depression or the recent Great Financial Crisis). The first part of the chapter develops a conceptual framework that distinguishes three main forms of systemic risk: contagion, aggregate shocks, and the endogenous build-up and unraveling of widespread financial imbalances (such as credit booms leading to debt overhangs). Ex ante (preventive) policies, notably macroprudential regulation and supervision, and ex post (crisis management and resolution) policies to contain systemic risks and financial crises are also discussed. The second and third parts of the chapter review the existing theoretical and empirical literature about systemic risk, using the previously described conceptual framework and making reference to features of the systemic crisis that started in the summer of 2007.

On June 1, 2018, the European Central Bank (ECB) celebrated its 20th anniversary. This paper provides a comprehensive view of the ECB's monetary policy over these two decades. The first section gives a chronological account of the macroeconomic and monetary policy developments in the euro area since the adoption of the euro in 1999, going through four cyclical phases "conditioning" ECB monetary policy. We describe the monetary policy decisions from the ECB's perspective and against the background of its evolving monetary policy strategy and framework. We also highlight a number of the key, critical issues that were the subject of debate. The second section contains various assessments. We analyze the achievement of the price stability mandate and developments in the ECB's credibility, and we also investigate the ECB's interest rate decisions through the lens of a simple empirical interest rate reaction function. Finally, we present the ECB's framework for thinking about nonstandard monetary policy measures and review the evidence on their effectiveness. One of the main themes of the paper is how the ECB utilized its monetary policy to respond to the challenges posed by the European twin financial and sovereign debt crises and the subsequent slow economic recovery, making use of its relatively wide range of instruments, defining new ones where necessary, and developing the strategic underpinnings of its policy framework.

On 1 June 2018 the ECB celebrated its 20th anniversary. This paper provides a comprehensive view of the ECB's monetary policy over these two decades. The first section provides a chronological account of the macroeconomic and monetary policy developments in the euro area since the adoption of the euro in 1999, going through four cyclical phases conditioning ECB monetary policy. We describe the monetary policy decisions from the ECB's perspective and against the background of its evolving monetary policy strategy and framework. We also highlight a number of the key critical issues that were the subject of debate. The second section contains a partial assessment. We first analyze the achievement of the price stability mandate and developments in the ECB's credibility. Next, we investigate the ECB's interest rate decisions through the lens of a simple empirical interest rate reaction function. This is appropriate until the ECB hits the zero-lower bound in 2013. Finally, we present the ECB's framework for thinking about non-standard monetary policy measures and review the evidence on their effectiveness. One of the main themes of the paper is how ECB monetary policy responded to the challenges posed by the European twin crises and the subsequent slow economic recovery, making use of its relatively wide range of instruments, defining new ones where necessary and developing the strategic underpinnings of its policy framework.

Once the full dimension of the financial crisis became clear in the last quarter of 2008 it became also clear to many that a difficult broad and protracted process of reregulating financial activities would follow. The list of 67 measures proposed by the Financial Stability Forum in its report on “Enhancing market and institutional resilience” (FSF 2008) ranging from bank capital requirements and liquidity management to credit ratings and from accounting standards to international supervisory cooperation, which was endorsed by G7 Finance Ministers and central bank Governors in their meeting in Washington, DC, on April 11, 2008, already foreshadowed this. More than seven years after the first material market turbulences emerged in the summer of 2007 the process is advanced but by no means finished…

Boom-bust cycles in real estate markets have been major factors in systemic financial crises and therefore need to be at the forefront of macroprudential policy. The geographically differentiated nature of real estate market fluctuations implies that these policies need to be granular across regions and countries. Before the financial crisis that started in 2007 property markets were overvalued in a range of European countries, but much like in other constituencies active policies addressing this were an exception. An increasing number of studies suggest that borrower-based regulatory policies, such as reductions in loan-to-value or debt-to-income limits, can be effective in leaning against real estate booms. But many of the new macroprudential policy authorities in Europe do not have clear powers to determine them. Moreover, the cross-border spillovers they may give rise to suggest the establishment of a well-defined macroprudential coordination mechanism for the single European market.

We investigate the impact of legislative reforms in merger control legislation in nineteen industrial countries between 1987 and 2004. We find that strengthening merger control decreases the stock prices of non-financial firms, while increasing those of banks. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. One explanation is that merger control introduces “checks and balances” that mitigates the potential abuse and wasteful enforcement of supervisory control in the banking sector.

We integrate systemic financial instability in an empirical macroeconomic model for the euro area. We find that at times of widespread financial instability the macroeconomy functions fundamentally differently from tranquil times. We employ a richly specified Markov-Switching Vectorautoregression model to capture the dynamic relationships between a set of core macroeconomic variables and a novel indicator of systemic financial stress. Both the parameters that capture the transmission of shocks through the economy and the variances of the shocks change at times of high stress in the financial system. In particular, the negative output effects of sizeable increases in financial stress are much larger after such a regime change than during tranquil times. Macroprudential and monetary policy makers are well advised to take these nonlinearities into account.

In times of systemic financial instability the behaviour of the macroeconomy changes fundamentally, in that both the volatility of financial shocks and the way they are transmitted through the economy change regime. This is the result of one empirical contribution to a novel literature that tries to incorporate systemic financial instability, and with it the lessons of centuries of financial crises, into standard macroeconomic models. The lead article in this issue of the Research Bulletin first reviews this literature and then presents the building blocks of the above contribution, including what it takes to empirically represent systemic financial instability. JEL Classification: E0

By Philipp Hartmann, Kirstin Hubrich and Manfred Kremer In times of systemic financial instability the behaviour of the macroeconomy changes fundamentally, in that both the volatility of financial shocks and the way they are transmitted through the economy change regime. This is the result of one empirical contribution to a novel literature that tries to incorporate systemic financial instability, and with it the lessons of centuries of financial crises, into standard macroeconomic models. The lead article in this issue of the Research Bulletin first reviews this literature and then presents the building blocks of the above contribution, including what it takes to empirically represent systemic financial instability.

This paper studies the implications of cross-border financial integration for financial stability when banks' loan portfolios adjust endogenously. Banks can be subject to sectoral and aggregate domestic shocks. After integration they can share these risks in a complete interbank market. When banks have a comparative advantage in providing credit to certain industries, financial integration may induce banks to specialize in lending. An enhanced concentration in lending does not necessarily increase risk, because a well-functioning interbank market allows to achieve the necessary diversification. This greater need for risk sharing, though, increases the risk of cross-border contagion and the likelihood of widespread banking crises. However, even though integration increases the risk of contagion it improves welfare if it permits banks to realize specialization benefits.

The financial and economic crisis that started in August 2007 is a clear case of the materialisation and propagation of systemic risk. The banking crisis reached a climax in September 2008 with the demise of Lehman Brothers and the subsequent support to the financial system. In spring 2010, it turned into a sovereign debt crisis. And we are now in a situation where widespread instabilities reach new heights.

Experience during the financial crisis illustrates that the integrated measurement and management of different forms of risk remains a challenge for industry practitioners, researchers and financial supervisors alike. In the context of related literature, this article summarizes new research on the interaction of market and credit risk and implications for risk management that is presented in this special issue. The research covered highlights in particular the errors that can occur in the aggregation of the two types of risk and the strong relationships between them that suggest caution in the use of pragmatic distinctions between them. The article also touches on some research-based lessons for supervisory policies and suggests some directions for future research.

We have developed an image quality theory for reconstruction that we apply to filtered back-projection (FBP) and statistical reconstruction (OSEM) for Single Photon Emission Computed Tomography (SPECT). Quantitative measures of reconstruction performance are given in terms of signal and noise power spectra, SPS and NPS, that we derive from phantom images. This allows evaluating the properties of statistical reconstruction, especially signal recovery, noise, impact of phantom size, and detector resolution. Our analysis shows how noise in reconstructed images is reduced by iterative resolution recovery.

This paper develops a game theory model to analyze the optimal structure of the Lender of Last Resort in Europe. When depositors are imperfectly informed, the indi¤erence to international transmission displayed by national authorities has value. A centralized authority is at a signalling disadvantage because it internalizes externalities: pooling equilibria arise in which depositors cannot disentangle its motivation to act. The optimum is achieved by delegation: the central authority decides when to retain control and when to delegate to the national authorities. However, when investment in bank supervision is endogenized, decentralization can dominate both centralization and

Segmentation in ultrasound data is a very challenging field of research in medical image processing. This article presents a method for automatic segmentation of biopsy needles and straight objects in noisy 3D image data. It uses a Hough-based segmentation approach, which has been exemplary adapted for the application on prostate biopsy data. An evaluation was performed on in-vivo 3D US data and shows promising results. Angular segmentation accuracy was evaluated with a mean of 2.1 degrees, which is comparable to human observers.

What Happened, Where? How Serious is the Damage? Why Did It Go Undetected/Underestimated for so Long? Experience with Crisis Management Implications for Basel II and Bank Capital Regulation Implications for Regulation of Financial Markets and Instruments Policy Panel: Where to From Here?.

Since the summer of 2007, credit markets in almost all industrial countries have been in substantial turmoil and this has become the focus of intense policy debates. The papers in this volume are contributed by the world's leading financial experts and constitute a thorough examination of the first credit market turmoil of the 21st Century. They provide an overview of the main causes, transmission mechanisms and economic implications of what by now has become a major systemic financial crisis. They assess the most important policy considerations and conclude about how to stabilize financial systems, attenuate repercussions on the real economy and shape future regulatory structures. The analyses, conclusions, and recommendations can be expected to influence both public and private policies to mitigate, if not prevent, such crises in the future.