Measuring value creation by comparing the RAROC of an exposure (the return on risk capital) with a single institution-wide hurdle rate is inconsistent with the standard theory of financial valuation. We use asset pricing theory to determine the appropriate hurdle rate for such a RAROC...

Building on Cecchetti and Li (2005), we show that the bank lending channel affects monetary policy trade-offs only when interest rates affect marginal costs of production (ie when there is a cost channel of monetary policy) in the New Keynesian monetary policy model. In our calibrated model the...

This paper examines the impact of messaging and technical standards on competition in the supply of securities transaction management services. Two simple switching cost models are used to clarify the impact of standards on barriers to entry and on the incentives to adopt harmonised and...

We study the impact of financing constraints on investment and output dynamics, in a continuous time setting with output a linear function of capital. Decline of net worth reduces investment and, if firms can rent capital to unconstrained outside investors, can create a 'net worth trap' with...

This paper investigates the macroconomics of real interest rates when there are constraints on debt finance, used both for insurance against income shocks and transferability of resources over time. We amend a standard continuous-time deterministic model of international exchange, with patient...

This paper investigates the macroconomics of real interest rates when there are constraints on debt fi nance, used both for insurance against income shocks and transferability of resources over time. We amend a standard continuous-time deterministic model of international exchange, with patient...

​We study the impact of financing constraints on investment and output dynamics, in a continuous time setting with output a linear function of capital. Decline of net worth reduces investment and, if firms can rent capital to unconstrained outside investors, can create a 'net worth trap' with...

It has been widely accepted that constraints on the wholesale funding of bank balance sheets amplify the transmission of monetary policy through what is called the 'bank lending channel'. We show that the effect of such bank balance sheet constraints on monetary transmission is in fact...

In autumn of 2007 Britain experienced its first bank run of any significance since the reign of Queen Victoria. The run was on a bank called Northern Rock. This was extraordinary, for Britain had been free of such episodes because by early in the third quarter of the 19th century the Bank of...

The developed world exhibits substantial but poorly understood differences in the efficiency and quality of low-value payment services. This paper compares payments arrangements in the UK, Norway, Sweden, and Finland, and discusses the impact of network effects on incentives to adopt new...