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We develop a model to rationalize and examine so-called "research bubbles", i.e. research activities based on overoptimistic beliefs about the impact of this research on the economy. Research bubbles occur when researchers selfselect into research activities and the government aggregates the...
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We introduce a new type of incentive contract for central bankers: inflation forecast contracts, which make central … bankers’ remunerations contingent on the precision of their inflation forecasts. We show that such contracts enable central … bankers to influence inflation expectations more effectively, thus facilitating more successful stabilization of current …
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Bank leverage constraints can emerge from regulatory capital requirements as well as from central bank collateral requirements in reserve lending facilities. While these two channels are usually examined separately, we are able to compare them with the help of a bank money creation model in...
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