Financial systems are inherently fragile because of the very function which makes them valuable: liquidity transformation. Regulatory reforms can strengthen the financial system and decrease the risk of liquidity crises, but they cannot eliminate it completely. This leaves monetary policy with a...

This paper studies a model where money is valued for the liquidity services it provides in the future. These liquidity services cannot be provided by any other asset. Changes in expectations of the value of future liquidity services affect the desired proportions of money and other assets in...

I describe the challenge of fully integrating securities markets in Europe by integrating the clearing and settlement functionalities. The initial condition is characterized by a multitude of standards, conventions, regulation and laws, which are inconsistent with a barrier-free post-trading...

This paper studies the effects of prohibiting individuals from holding foreign assets, and of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities. Although firms can perform arbitrage between domestic and foreign financial markets, the...

This paper develops a method to solve and simulate cash-in-advance models of money and asset prices. The models are calibrated to US data spanning the period from 1890 to 1987 and are used to study some empirical regularities observed in the US data over this period. The phenomena which are the...

When tastes are represented by a class of generalized preferences which -- unlike traditional Von-Neumann preferences -- do not confuse behavior towards risk with attitudes towards intertemporal substitution, the true beta of an asset is, in general, an average of its consumption and market...

This paper provides two alternative estimation and testing procedures of a representative-agent model of asset pricing which relies on a particular parametrization of non-expected-utility preferences. The first is based on maximum-likelihood estimates, supplemented with an explicit model of time...

This paper studies the welfare effects of international investment to evade domestic taxes on domestic investment income. Capital mobility for tax evasion eliminates distortions in the intertemporal allocation of consumption, but introduces distortions in domestic production. Conversely, a...

This paper reviews the extensive theoretical and empirical literature on currency substitution. After discussing the ambiguity surrounding the definition of currency substitution, the paper illustrates the causes of substitutability of different currencies using a cash-in-advance model and a...

This paper discusses a model corporate tax system based on the application of the residence principle. This tax system, while preserving national sovereignties, minimizes the distortions from international capital mobility. The paper is motivated by an analysis of European capital income tax...