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While paramount to the modern economy, understanding how the banking system works has been usually cast aside from overall economic education. Even in the aftermath of the recent financial crisis, which has underlined the vital importance of banking in the economy, the workings of the sector remain a black box. To this end, this book provides a comprehensive and easy to read review of the banking sector, covering all issues related to commercial and investment banking and providing experienced as well as non-expert readers the opportunity to expand their knowledge on these topics. After going through the book, readers have the opportunity to gain a deeper knowledge regarding the commercial and investment functions of the banking sector and the ability to evaluate the potential outcome of policy actions.

AbstractIn 2018, I published an article in this journal aiming to examine whether the UK could potentially benefit from the depreciation of the pound following the Brexit decision. During this year's issue, a study by Bahmani‐Oskooee and Karamelikli (2021) suggested that the findings of said article were based on sign misinterpretation. In this article, I explain that the misunderstanding that has arisen is due to an incorrect definition of a variable in the appendix. When the revised definition is taken into consideration, the conclusions reached still hold.

ABSTRACTThe stability of Okun's law coefficient in the United States from 1949 to 2015 is examined using a regression with GARCH errors in order to capture the volatility of the series. Rolling estimations suggest that taking the volatility of the series into account yields more stable results compared to the simple OLS estimation, irrespective of the specification (gap or growth model), the data frequency (monthly or quarterly), or the length of the rolling window. The results also suggest that the persistence of shocks became much more important in explaining contemporaneous volatility when data from the recent global financial crisis were incorporated. In contrast, the feedthrough of output shocks in next period's output volatility was more important in the past, and especially during the 1970s stagflation period, but has been declining since.

Following the United Kingdom's decision to leave the European Union, the pound has depreciated against the euro. This study aims to examine whether the UK could potentially benefit from this depreciation, that is, improve its trade balance with its euro area counterparts. Theory suggests that this could happen only if the Marshall–Lerner condition holds, i.e. if the sum of import and export elasticities is greater than unity. Due to the fact that the Marshall–Lerner condition is static, a more dynamic estimate, the J‐curve, which allows for a distinction between the short‐run and the long‐run response of the trade balance, is employed using bilateral trade data between the UK and 10‐euro area countries. Results, employing both bilateral ARDL and Pooled Mean Group methods show that, until a new trade agreement is reached, the UK trade balance vis‐à‐vis the euro area is not expected to change significantly in the short‐run, while it should improve in the long‐run. The wide range of bilateral findings underlies the idiosyncrasies between euro area countries and also suggests that there is a rationale for countries to explore different paths such as bilateral agreements with the UK.

Abstract
We examine whether conventional monetary policy has an impact on bank credit standards (CS) through the manipulation of interest rates. Using three distinct methodologies, to provide more insights and perspectives to this relationship, the results confirm that the policy rate appears to have a positive relationship with CS, that is an increase in interest rates would, ceteris paribus, lead to a tightening of CS. However, this effect is not found to be large and, most importantly, it is likely to be outweighed by the presence of counteracting factors, the most notable of which is private consumption. Other macroeconomic factors such as inflation, investment, and housing prices also have an impact on bank CS, the size of which varies across specifications. The empirical results suggest that while the interest rate can cool off banking behaviour, ceteris paribus, that is if no change in the economy takes place, this is not likely a realistic scenario. (JEL codes: E51, E52, E58, and G21)

Abstract
We investigate the relationship between the four main inflation components (services, NEIG, energy, and food) and wages in the euro area. Using a panel vector autoregressive (PVAR) model for the 2002q1–2021q4 period, we find that wages positively respond to shocks in services inflation, energy inflation and GDP growth, with the first being the largest. In addition, services inflation is affected by all other inflation categories. The results are in line with the inflation path since 2022, following the food and energy price surges. Implications for policy include a feedback loop between wages and services inflation that lasts at least a year, with a possible reinforcement effect stemming from inflation expectations. Similar to US evidence, we also find that the unemployment rate does not affect wage developments in a Phillips curve setup. (JEL codes: J30, E24, E31)

AbstractWe use cointegration-based techniques to investigate the relationship between oil prices and the euro effective exchange rate taking also into account the influence of interest rates and stock prices. We find that higher oil prices cause a depreciation in the euro exchange rate (either nominal or real) in the short run. This suggests that during episodes of higher energy prices, the euro area consumer is faced with additional price pressures, as a depreciated euro causes import prices to further rise. Our study also indicates that as stock prices rise in the short and long term, the euro appreciates, while higher oil prices will likely result in overall higher policy rates and lower stock prices.