We construct a comprehensive dataset linking macroprudential policy instruments to household survey data from European Union countries. We show that two commonly used lender-based macroprudential policy instruments — levy on financial institutions and minimum capital requirement — affect new mortgage loans depending on the household’s income levels. Following higher levies on financial institutions, higher-income households on average experience a larger reduction in mortgage loan size compared to lower-income households. In contrast, following higher minimum capital requirements, lower-income households on average experience a larger reduction in loan size. We provide evidence of the different channels through which these differential effects operate.

We construct a new measure of deposit insurance generosity for many countries, empirically model the exogenous international influences on the adoption and generosity of deposit insurance and use a novel econometric method to explore the causal chain from the expansion of deposit insurance generosity to increased overall lending, increased lending to households, increased banking system leverage, and more severe and frequent banking crises. Greater deposit insurance generosity robustly produces greater overall lending relative to bank assets and more lending to households relative to both bank assets and GDP, and results in higher banking system leverage. Our estimates, however, are not conclusive regarding whether greater deposit insurance generosity resulted in greater total loans relative to GDP or in more frequent or severe banking crises.

We show that the TFP growth of European micro, small, and medium-sized firms (SMEs) diverged from large firms after the global financial crisis. The average postcrisis TFP growth of medium-sized, small, and micro firms was, respectively, 1.1, 2.9, and 5.4 percentage points lower than that of large firms. This SME productivity gap is larger for firms with more severe credit supply shocks. The gap is partially attributable to a larger postcrisis reduction in intangible capital at SMEs than at large firms. Horseraces suggest that SME indicators are more robust and more powerful predictors of postcrisis TFP growth than other indicators.

We present a new dataset on the dynamics of non-performing loans (NPLs) during 92 banking crises since 1990. The data show similarities across crises in NPL buildup but much heterogeneity in the pace of NPL resolution. We document how high and unresolved NPLs deepen post-crisis recessions and use a machine learning approach to establish pre-crisis predictors of NPL problems. These predictors—a set of weak macroeconomic, institutional, corporate, and banking sector conditions—help shed light on post-COVID-19 NPL vulnerabilities.

We identify start days of 156 episodes of social unrest from textual analysis of media reports and show a systematic negative impact of social unrest on stock market performance. Social unrest on average leads to a 1.4 percentage point drop in cumulative abnormal returns in 2 weeks, more for events that last longer and that happen in emerging markets. Stronger institutions, particularly better governance and more democratic systems, are associated with a smaller adverse impact of social unrest on stock market returns. We argue this reflects the ability of better institutions to provide a more reliable way to reconcile conflicting views and dampen uncertainty after unrest.