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In this article, we describe a time-consistency problem that can arise in the government's policy toward insolvent financial firms. We present this problem using a simple model in which shareholders of a large financial firm can raise low-cost debt financing and take on an excessive amount of...
Persistent link: https://www.econbiz.de/10009320886
An introduction to the special issue on modern macroeconomic theory.
Persistent link: https://www.econbiz.de/10010551196
This article reviews macroeconomic models with heterogeneous households. A key question for the relevance of these models concerns the degree to which markets are complete. This is because the existence of complete markets imposes restrictions on (i) how much heterogeneity matters for aggregate...
Persistent link: https://www.econbiz.de/10010551198
The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some...
Persistent link: https://www.econbiz.de/10010551199
The repo market in the United States played a significant role during the 2007–2009 global financial crisis. A large portion of the transactions in this market take the form of a tri-party repo, where a third party (a clearing bank) intermediates between the borrower and the lender. The sudden...
Persistent link: https://www.econbiz.de/10010555519
Implicitly, central banks reject the propositions of monetarism. They do not characterize themselves as creators of money, but instead emphasize their role in influencing financial intermediation. They do not discuss monetary policy in terms of a rule, but instead use the language of discretion....
Persistent link: https://www.econbiz.de/10010722862
The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some...
Persistent link: https://www.econbiz.de/10010722863
An introduction to the special issue on modern macroeconomic theory.
Persistent link: https://www.econbiz.de/10010722865
In this article, we describe a time-consistency problem that can arise in the government's policy toward insolvent financial firms. We present this problem using a simple model in which shareholders of a large financial firm can raise low-cost debt financing and take on an excessive amount of...
Persistent link: https://www.econbiz.de/10010722867
The repo market in the United States played a significant role during the 2007–2009 global financial crisis. A large portion of the transactions in this market take the form of a tri-party repo, where a third party (a clearing bank) intermediates between the borrower and the lender. The sudden...
Persistent link: https://www.econbiz.de/10010722869