Mainstream macro-models have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms...

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Busts after periods of prolonged prosperity have been found to be catastrophic. Financial institutions increase their leverage and shift their portfolios towards projects that were previously considered too risky. This results from institutions rationally updating their expectations and becoming...

Neither the achievement of price stability, via the MPC, nor the application of micro-prudential oversight, via the FSA, led to overall financial stability. There is a gap that needs to be filled by a macro-prudential authority (M-PA), FPC in the UK. The only macro-prudential instrument used...

Although Central Banks have pursued the same objectives throughout their existence, primarily price and financial stability, the interpretation of their role in doing so has varied. We identify three stable epochs, when such interpretations had stabilised, i.e., a) The Victorian era, 1840s to 1914;...

 

My first-ever essay into quasi-independent research involved an attempt to understand, explain and even possibly extend G.L.S. Shackle’s model of decision-making under uncertainty.  Undergraduates at Cambridge who had done well in Part 1 of the Economics Tripos were encouraged to participate...

The relative liquidity of financial assets is significantly influenced by the Central Bank’s willingness to buy such assets, or to accept them as collateral, in the course of providing additional cash to banks.  Those assets which the Central Bank will deal in for such purposes become more...

 

In this paper I try to address the question of whether, and why, it matters whether banking supervision is undertaken in-house in the Central Bank or in a separate specialised supervisory institution. After all, the bank supervisors and those in the Central Bank concerned with systemic stability...