This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the increase in...

The fiscal governance of the EMU is in dire need of reform. Its current arrangements suff er from several shortcomings, most notably, the limitations they impose on national fiscal policies, steering them towards too restrictive or pro-cyclical stances; the absence of an unconditional lender of...

The European Central Bank (ECB) is a special, even unique central bank. It is a central bank without a treasury by its side or a state behind it, just as the euro, Europe's common currency that the ECB is tasked with guarding, is a 'denationalised' currency. The euro area is a rare exception to...

Despite signs of recovery from the global financial crisis, the GDP growth rate for the Indian economy is likely to be between 5.8 to 6.1 per cent in 2009-10, below the 6.7 per cent recorded in fiscal 2008-09. While there has been an improvement in Indian industry, particularly the manufacturing...

This paper addresses the discussion between economic power and the power of politics with particular focus on financial markets. After general reflections about the economic basis of power, the paper discusses in a general equilibrium framework how financial innovations can lead to risk creation...

The aim of this paper is to demonstrate how the change in actual and potential market risks in the Dow Jones Industrial Average (DJIA) during the two-year period 2007-2008 can be analyzed with the help of-analysis. In the empirical analysis, the average of the Lyapunov exponents for the dynamic...

This paper examines persistence in the Ukrainian stock market during the recent financial crisis. Using two different long memory approaches (R/S analysis and fractional integration) we show that this market is inefficient and the degree of persistence is not the same in different stages of the...