Since the beginnings of the eighties house prices in the Netherlands haveincreased steadily and considerably. In this paper we study the effect of this developmenton the demand for second mortgages and on the savings of Dutch households. We use the dataof the Dutch socio-economic panel for the...

We investigate actual capital chosen by banks in presence of capital minimum requirements and ex-post penalties for violating them. The model yields excess capital that is always positive and increases during times of distress in the economy, which is in line with empirical evidence. Next, we...

This paper reviews the theoretical and empirical literature on links between domestic financial development and economic growth. It starts with the pioneers in this field and then classifies two main schools favouring liberal financial regimes. First McKinnon and Shaw advocated financial...

Systemic banking crises often continue into recessions with large output losses (Reinhart & Rogoff 2009a). In this paper we ask whether the way Governments intervene in the financial sector has an impact on the economy's subsequent performance. Our theoretical analysis focuses on bank incentives...

Under Basel III rules, banks become subject to a liquidity coverage ratio (LCR) from 2015 onwards, to promote short-term resilience. We investigate the effects of such liquidity regulation on bank liquid assets and liabilities. Results indicate co-integration of liquid assets and liabilities, to...

This paper examines the sources of stickiness in aggregate consumption growth. We first derive a dynamic consumption equation which encompasses many recent developments in consumption theory: habit formation, intertemporal substitution effects, consumption based on current income, and...

The equity premium puzzle holds that the coefficient of relative risk aversion estimated from the consumption based CAPM under power utility is excessively high. Moreover, estimates in the literature vary considerably across countries. We gauge the uncertainty pertaining to the country risk...

The rise in within-group consumption inequality in response to the increase in within-group income inequality over the last three decades in the U.S. is puzzling to expected-utility-based incomplete market models. The two-sided lack of commitment models exhibit too little consumption inequality...

This paper explores the interaction between retirement flexibility and portfolio choice in an overlapping-generations model of a closed economy. Retirement flexibility is often seen as a hedge against capital market risks which justifies more risky asset portfolios. We show, however, that this...

This discussion paper resulted in a publication in the <A href="http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0351.2011.00425.x/abstract;jsessionid=F64011DF99B22B6E2BF33FDA1C47DE9C.f04t03">'Economics of Transition'</A>, 2011, 19(4), 639-666.<P> Whether fiscal policy is sustainable depends on a government's future revenue and expenditure streams, both of which are highly uncertain. In commodity-rich countries, this problem is...</p></a>