The overriding practical problem now is the tension between the global financial and market system and the national political and power structures. The main analytical short-coming lies in the failure to incorporate financial frictions, especially default, into our macro-economic models. Neither...

We use Bayesian time-varying parameters VARs with stochastic volatility to investigate changes in the marginal predictive content of the yield spread for output growth in the United States and the United Kingdom, since the Gold Standard era, and in the Eurozone, Canada, and Australia over the...

This paper assesses the linkages between money, credit, house prices and economic activity in industrialised countries over the last three decades. The analysis is based on a fixed-effects panel VAR estimated using quarterly data for 17 industrialized countries spanning the period 1970-2006. The...

The regulation of bank capital in the form of capital adequacy requirements is itself inherently procyclical; it bites in downturns, but fails to restrain in booms. The more risk-sensitive the regulation, the greater the scope for pro-cyclicality to become a problem, particularly in view of the...

Our purpose in this paper is to produce a tractable model which illuminates problems relating to individual bank behaviour and risk-taking, to possible contagious interrelationships between banks, and to the appropriate design of prudential requirements and incentives to limit ‘excessive’...

This paper examines how well forecasters can predict the future time path of (policy-determined) short-term interest rates. Most prior work has been done using U.S. data; in this exercise we use forecasts made for New Zealand by the Reserve Bank of New Zealand (RBNZ) and those derived from money...

The objective of this paper is to propose a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction between banks, recognising that the actual risk to which an individual bank is exposed also depends on its interaction with other banks and other private...

Using a new database covering some 91 supervisory agencies, this paper examines how important various skilled experts are in the regulatory process and the relative usage of different kinds of such experts. We seek to explore what kind of perspective supervisors in different institutional...