Government-financed bank restructuring programs, occasionally costing up to 50% of GDP, are commonly used to resolve banking crises. We analyze the Ramsey-optimal paths of bank recapitalization programs that weigh recapitalization benefits and costs under different financing options. In our...

The consensus about the ability of the standard open-economy neoclassical growth model to account for interest-rate driven business cycles has changed over time: whereas early research concluded that business cycles are neutral to interest-rate shocks, more recent investigations suggest that...

This paper studies the possibility of endogenous fluctuations caused by activities of financial intermediaries. Risk-averse agents borrow from banks and invest in a risky two-state capital technology. The probability of success with the technology is assumed to be decreasing in the amount of...