We develop a multi-period general equilibrium model of bank deposit, credit, and interim inter-bank loan markets in which banks initially specialize in their choices of debtors, leading to underdiversification, but nevertheless become entwined via inter-bank markets, leading to the fortunes of...

Not only in the classic Arrow-Debreu model, but also in many mainstream macro models, an implicit assumption is that all agents honour their obligations, and thus there is no possibility of default. That leads to well-known problems in providing an essential role for either money or for...

This paper proposes a measure of financial fragility that is based on economic welfare in a general equilibrium model calibrated against UK data. The model comprises a household sector, three active heterogeneous banks, a central bank/regulator, incomplete markets, and endogenous default. We...

We define a non-tatonnement dynamics in continuous-time for pure-exchange economies with outside and inside fiat money. Traders are myopic, face a cash-in-advance constraint, and play dominant strategies in a short-run monetary strategic market game involving the limit-price mechanism. The...

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from...

Our purpose in this paper is to produce a tractable model which illuminates problems relating to individual bank behaviour and risk-taking, to possible contagious inter-relationships between banks, and to the appropriate design of prudential requirements and incentives to limit `excessive`...

This paper first extends the canonical General Equilibrium with Incomplete Markets (GEI) model with money and default to allow for competitive banking and financial instability. Second, it introduces capital requirements for the banking sector to assess the short and medium term macroeconomic...

I address the issue of the `number` of International Monetary Equilibria that the international finance model of Geanokoplos and Tsomocos (2002) possesses. The mainstream competitive model has locally unique equilibria with respect to the real side of the economy; however, it manifests nominal...

We show, in an exchange economy with default, liquidity constraints and no aggregate uncertainty, that state prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is derived along the lines of Dubey and Geanakoplos (1992). Two...

On the macro-economic policy side of Central Banking a remarkable consensus has been emerging over the last two decades. This covers both the applicable theoretical framework for analysing the transmission mechanism of monetary policy and also the appropriate institutional structure for the...