Essays on Enhancing Financial Stability and Macroprudential Policy

The recent financial crisis has brought the search for a market
design that ensures stable bank funding at the top of regulator's
policy agenda. Traditional banking is rapidly changing.
Securitization, shadow banking, persistently low interest rates
have created a new economic environment. How do interest
rates affect the susceptiblity of the banking system in the longterm?
Should financial and monetary authorities coordinate
their actions? Should financial stability considerations be added
into monetary policy rules? How prudential regulation must
adjust to the emergence of shadow banking? Are bailouts a
thing of the past? The extant literature is silent on these
questions. The thesis will address these questions to introduce
new pillars for macroprudential policy that will affect the way
traditional banking provides lending, deposit taking, access to
lender of last resort and deposit insurance. In addition, the
thesis will develop a novel theory within an agent-based multilayered
framework of the interbank market to study uncertainty
in financial networks, and its effect on credit risk and the
supply of funding to the economy. Finally, the model will also
study central banks policies to aleviate market freezes and to
enhance financial stability.