Important questions concerning the structure and operation of a European Central Bank remain unanswered. Although there exists no precedent for the process of institution-building in which the European Community is currently engaged, the founding and early operations of the Federal Reserve...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

This Paper presents a general equilibrium currency crisis model of the 'third generation', in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...

Banking systems have rapidly grown to a point where for many countries bank assets amount to multiples of GDP. As a consequence, government’s capacity to provide stability-enhancing fiscal guarantees against systemic crises can no longer be taken for granted. As regulation of dynamic financial...

The complexity resulting from intertwined uncertainties regarding model misspecification and mismeasurement of the state of the economy defines the monetary policy landscape. Using the euro area as laboratory this paper explores the design of robust policy guides aiming to maintain stability in...

This paper builds a dynamic general equilibrium macro-finance model with two types of borrowers: entrepreneurs who want to produce and gamblers who want to play a lottery. It links central bank's interest rate policy to expected cash flows of both types. This link enables us to study how the...

The paper uses Italian daily data from January 1991 to July 1992 (a period in which the lira belonged to the narrow EMS band without foreign exchange controls) to measure the relationship between liquidity and interest rates. The high quality of the data allows us to separate that part of...

This paper evaluates the contribution of seigniorage and implicit taxation of financial intermediation to the financing of the budget deficits in Spain and Portugal during the 1980s. The paper starts with a simple partial equilibrium model of the banking sector, which is used to derive two sets...

We study the interbank markets for overnight loans of the major industrial countries, linking the behaviour of short-term interest rates to the operating procedures of these countries’ central banks. We find that many of the key behavioural features of US federal funds rates, on which previous...

This Paper provides the first empirical examination of the microstructure of the euro money market, using tick data from brokers located in six countries. Special emphasis is put on the institutional environment (monetary policy decisions and their implementation, payment systems and private...