We show that a U‐shaped monetary rate path increases banking crisis risk, via credit and asset price cycles, analyzing 17 countries over 150 years. Rate hikes (raw or instrumented) increase crisis risk, but only if preceded by prolonged cuts. These patterns are unique to banking crises, unlike noncrisis recessions. Regarding the mechanism, prolonged cuts raise the likelihood of large credit and asset price booms, consistent with higher credit supply and risk‐taking. Subsequent hikes strongly reduce credit and asset prices, and increase banks' realized credit risk, rather than interest rate risk. We find consistent results in administrative loan‐level data for Spain.

We study how firm-level carbon emissions affect bank lending and real outcomes in a sample of global firms with syndicated loans. We exploit bank-level climate commitments as firm-level shocks to lending relationships, using firms' prior credit exposures to identify credit supply effects. Firms with higher emissions that previously borrowed from committed banks receive less bank credit. Evidence from lending volumes, prices, and within-firm-time loan-level data indicates a supply-side shift away from high-emission firms, not explained by borrower risk. Affected firms reduce debt, leverage, size, and investment, yet we find no reduction in future emissions, instead documenting evidence consistent with greenwashing.

We analyze how countercyclical liquidity policy—via reserve requirements (RRs)—affects the credit cycle. For identification, we exploit supervisory credit register data and RR changes in Brazil made for monetary and macroprudential purposes and affecting banks differently. We find that countercyclical liquidity policy smooths credit supply cycles at the loan and firm levels. The effects of easing during crises are three times stronger than are those of tightening during booms, particularly for low-risk firms. We also explore interest rate policy. Credit supply effects are stronger among high-risk firms and during tightening, when interest rates are more effective than RRs.

We show that bank shocks to firms propagate along the production network with stronger upstream than downstream effects. Our identification relies on (i) administrative datasets from Spain covering supplier-customer transactions and bank loans, (ii) bank credit supply shocks from the global financial crisis, and (iii) a general equilibrium model of a production network with financial frictions, estimated structurally. We find network propagation amplifies the impact of bank shocks on GDP growth by nearly 50 percent. Moreover, bank shocks to firms’ distant suppliers and customers contribute similarly to this aggregate effect as bank shocks to firms’ direct customers and suppliers.

We show that FX interventions can be effective, particularly in attenuating global financial spillovers. We exploit global financial shocks and Brazilian central bank interventions in FX derivatives using three matched administrative registers: bank credit (to firms), foreign credit to banks, and employer‐employees. After the U.S. Taper Tantrum (followed by emerging markets' FX turbulence), Brazilian banks with more foreign debt cut credit supply, reducing firm‐level employment. A subsequent large policy intervention supplying derivatives against FX risks — hedger of last resort — halved the negative effects. A 2008 to 2015 panel exploiting global FX shocks and local FX interventions confirms the results and the hedging channel. However, the FX policy entails fiscal and moral hazard costs.