Inflation targeting is gaining popularity as a framework for conducting monetary policy. At the same time many countries employ some sort of foreign exchange intervention policy assuming that these two policies can coexist. This paper attempts to show that both policies are not sustainable....

How long does it take for the stock of financial intermediation capital to return to its optimal, profit maximizing, level following a severe shock, and what is the mechanism that governs it? We introduce a dynamic neoclassical model of capital structure that is governed by the process of...