An economy in which deposit-taking banks of a Diamond/Dybvig style and an asset market coexist is modelled. Firstly, within this framework we characterize distinct financial systems depending on the fraction of households with direct investment opportunities that are less efficient than those...

This article develops a model of bank runs and crises and analyses how the presence of a lender of last resort (LOLR) affects the solvency of the banking system. We obtain a one to one mapping from the depositors' equilibrium strategy to an optimal contract prevailing in the economy. The study...

This paper contains a study of stochastic stability of the development trap in a model of economic growth when the production function is subject to externalities and, as a result, the development trap steady state ins indeterminate. In the presence of indeterminacy, sunspot equilibria can...

We consider solutions to general linear dynamic systems, possibly singular and non square with general stability conditions. Besides constructing a general algorytm for finding solutions we provide necessary and sufficient conditions for existence of a solution.

During 1997 Bulgaria has experienced one of the most deep financial crises in CEE countries. The combination with currency crisis, widespread bank failures, hyperinflation and government crisis has a very negative affect over the whole Bulgarian economy. Parallel with the introduction of...

We link banking and asset prices in a simple monetary macroeconomic model. Our main innovation is to consider how wide-spread default affects the banking system. We find that the interaction of credit, asset prices, and loan losses explains a complete spectrum of outcomes, including financial...

This paper links banking with asset prices in a monetary macroeconomic model. The main innovation is to consider how falling asset prices affect the banking system through wide-spread borrower default, while deriving explicit solutions and balance sheet effects even far from the steady state. We...

The study of transparency is increasingly a more topical, broadly relevant, but also more under-researched enterprise. The Asian financial crisis has highlighted not only the welfare consequences of financial sector transparency, sparking a series of yet unresolved debates, but has also linked...