Agnese Leonello
Research
- Division
-
Financial Research
- Current Position
-
Economist
- Fields of interest
-
Financial Economics
- Education
- 2007-2011
PhD Economics, European University Institute, Florence, Italy
- 2005-2007
MA Economics, University of Naples "Federico II", Italy
- 2002-2005
BA Economics, University of Naples "Federico II", Italy
- Professional experience
- 2014-
Economist - Financial Research Division, Directorate General Research, European Central Bank
- 2011-2014
Post-Doctoral Fellow - Financial Institutions Center, The Wharton School of the University of Pennsylvania, Philadelphia, USA
- Awards
- 2012
Best PhD Thesis on Financial Stability, Fondation Banque Centrale du Luxembourg
- 2010
Fourth Year completion grant, European University Institute, Florence, Italy
- 7 July 2016
- WORKING PAPER SERIES - No. 1932Details
- Abstract
- We develop a model where banks invest in reserves and loans, and trade loans on the interbank market to deal with liquidity shocks. Two types of equilibria emerge, depending on the degree of credit market competition and the level of aggregate liquidity risk. In one equilibrium, all banks keep enough reserves and remain solvent. In the other, some banks default with positive probability. The latter equilibrium exists when competition is not too intense and high liquidity shocks are not too likely. The model delivers several implications concerning the severity of crises and credit availability along the business cycle.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G20 : Financial Economics→Financial Institutions and Services→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 28 February 2017
- WORKING PAPER SERIES - No. 2032Details
- Abstract
- Banks are intrinsically fragile because of their role as liquidity providers. This results in underprovision of liquidity. We analyze the effect of government guarantees on the interconnection between banks' liquidity creation and likelihood of runs in a model of global games, where banks' and depositors' behavior are endogenous and affected by the amount and form of guarantee. The main insight of our analysis is that guarantees are welfare improving because they induce banks to improve liquidity provision although in a way that sometimes increases the likelihood of runs or creates distortions in banks' behavior.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 22 May 2017
- WORKING PAPER SERIES - No. 2067Details
- Abstract
- This paper studies the effects of government guarantees on the interconnection between banking and sovereign debt crises in a framework where both the banks and the government are fragile and the credibility and feasibility of the guarantees are determined endogenously. The analysis delivers some new results on the role of guarantees in the bank-sovereign nexus. First, guarantees emerge as a key channel linking banks’and sovereign stability, even in the absence of banks’holdings of sovereign bonds. Second, depending on the specific characteristics of the economy and the nature of banking crises, an increase in the size of guarantees may be beneficial for the bank-sovereign nexus, in that it enhances …financial stability without undermining sovereign solvency.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 12 June 2017
- RESEARCH BULLETIN - No. 35Details
- Abstract
- The recent financial and sovereign debt crises showed that providing public guarantees to banks may pose serious threats to sovereign solvency, despite their short-term beneficial effects on financial stability. This article analyses the role that public guarantees to banks play in the bank-sovereign nexus and offers a more nuanced assessment of their implications for sovereign debt crises. Depending on the nature of the banking crisis and the specific characteristics of the economy, guarantees may improve financial stability without undermining sovereign solvency, thus generating a positive feedback loop between bank and sovereign stability.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 27 May 2019
- WORKING PAPER SERIES - No. 2287Details
- Abstract
- The architecture of supervision – how we define the allocation of supervisory powers to different policy institutions – can have implications for policy conduct and for the economic and financial environment in which these policies are implemented. Theoretically, an integrated structure for monetary policy and supervision brings important benefits arising from better information flow and policy coordination. Aggregate supervisory information may significantly improve the conduct of monetary policy and the effectiveness of the lender of last resort function. As long as the process towards an integrated structure does not shrink the set of available tools, monetary policy and supervision are no less effective in pursuing their objectives than a separated structure. Additionally, an integrated structure does not seem to be correlated with more price and/or financial instability, as suggested by analysing a large global set of countries with different supervisory set-ups. A centralised structure for supervision entails significant benefits in terms of fewer opportunities for supervisory arbitrage by banks and less informational asymmetry. A large central supervisor can take advantage of economies of scale and scope in supervision and gain a broader perspective on the stability of the entire banking sector, which should result in improved financial stability. Potential drawbacks of a centralised supervisory structure are the possible lack of specialisation relative to local supervisors and the increased distance between the supervisor and the supervised institutions. We discuss the implications of our findings in the euro area context and in relation to the design of the Single Supervisory Mechanism (SSM).
- JEL Code
- E5 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation - Network
- Discussion papers
- 2018
- Journal of Economic TheoryGovernment Guarantees and Financial Stability
- 2018
- Journal of Financial EconomicsGovernment Guarantees and the Two-way Feedback between Banking and Sovereign Debt Crises
- 2017
- Review of FinanceCredit Market Competition and Liquidity Crises
- 2015
- Journal of Financial RegulationMoral Hazard and Government Guarantees in the Banking Industry
- 2011
- Oxford Review of Economic PolicyDeposit Insurance and Risk-Taking
- 2017
- Achieving Financial Stability: Challenges to Prudential Regulation, eds. Evanoff, D.D., Kaufman, G., Leonello, A., and Manganelli, S., Chicago Fed International Banking Conference proceedingsGovernment Guarantees to Financial Institutions: Banks’ Incentives and Fiscal Sustainability
- 2016
- Handbook of European Banking, eds. Casu, B., and Beck, T., Palgrave Macmillan UKRegulatory reforms in the European banking sector