This paper explores the impact of credit market on the entrepreneurs and demand for credit in a credit constrained economy and the resultant impact on the capital flows. In standard trade models the capital flows across countries are explained as a result of the rate of return differentials due...

This paper uses loan application-level data from a peer-to-peer lending platform to study the risk-taking channel of monetary policy. By employing a direct ex-ante measure of risk-taking and estimating the simultaneous equations of loan approval and loan amount, we are the first to provide...

This paper analyzes the effects of several policy instruments to mitigate financial bubbles generated in the banking sector. We augment a New Keynesian macroeconomic framework by endogenizing boundedly-rational expectations on asset values of loan portfolios and allow for interbank trading. We...

We suggest an explanation for the existence of “mission drift”, the tendency for Microfinance Institutions (MFIs) to lend money to wealthier borrowers rather than to the very poor. We focus on the relationship between MFIs and external funding institutions. We assume that both the MFIs and...

We explore the intertwined dynamics of asset prices and the macroeconomy in a Behavioural model of Credit Cycles (BCC) characterized by a credit friction à la Kiyotaki and Moore and heterogeneous expectations cum heuristic switching à la Brock and Hommes. This behavioural approach allows to...

How do banks facilitate creative destruction and shape firm turnover? We develop a dynamic general equilibrium model of bank credit reallocation with endogenous firm entry and exit that allows for both theoretical and quantitative analysis. By restructuring loans to firms with poor prospects and...

Conditional yield skewness is an important summary statistic of the state of the economy. It exhibits pronounced variation over the business cycle and with the stance of monetary policy, and a tight relationship with the slope of the yield curve. Most importantly, variation in yield skewness has...

This note examines the stochastic behaviour of US monthly 10-year government bond yields. Specifically, it estimates a fractional integration model suitable to capture both persistence and non-linearities, these being two important properties of interest rates. Two series are analysed, one from...

We study monetary policy in a New Keynesian model with a variable credit spread and scope for central bank asset purchases to matter. A novel financial and labor market interaction generates an endogenous cost-push channel in the Phillips curve and a credit wedge in the IS curve. The “divine...

We compare integration of economic, matching and networking markets. There can be losers from integration in all three cases, but their relative numbers depend on the type of market. There can be many losers from integration of pure exchange economies. There are relatively few losers from...