Credit rating agencies (CRAs) very often have been criticized for announcing inaccurate credit ratings and are suspected of being exposed to conflicts of interest. Despite these objections CRAs remained largely unregulated. Based on Pagano & Immordino (2007), we study the optimal regulation of...

This paper provides a framework to analyse emergency liquidity assistance of central banks on financial markets in response to aggregate and idiosyncratic liquidity shocks. The model combines the microeconomic view of liquidity as the ability to sell assets quickly and at low costs and the...

Liquidity problems lie at the heart of crises on financial markets as demonstrated in this paper by detailed descriptions of the stock market crash in 1987, the LTCM-crisis in 1998 and the financial market consequences of 11 September 2001. The events also demonstrate that modern central banks,...

The article illustrates how the integration of modern theory of finance and stochastic dynamic macroeconomic analysis provides a deeper understanding of the link between asset prices and consumption. It shows that this approach gives only a partial explanation for recent trends in US...

Recent econometric evidence has noticeably changed views on the desirability and the appropriate design of explicit Deposit Insurance Schemes (DIS). The purpose of this paper is to take a second look at the data. After surveying recent empirical work and providing a theoretical framework, we...