This paper proposes a model that links households and firms, as usual, by markets forfactors and goods and, additionally, by a banking sector that channels households’funds to firms and eliminates idiosyncratic risk. In equilibrium, agency costs and taxbenefits of corporate debt are equalizing...

How can globalization affect the optimal choice of monetary policy strategy during asset price booms in a small open economy? Globalization can have an impact on both the supply and the demand side of the economy. Focusing on the supply side of globalization, it has been shown that a flattening...

In this paper we analyzed the violations of UIP for the Swiss Franc against the Dollar, the Euro, the Yen, thePound and the Canadian Dollar using recent data up to fall 2008. This exercise provides the following mainresults : first the Swiss interest rate puzzle disappeared, i.e. mean returns on...

This paper delineates the simultaneous impact of non-anticipated information onmean and variance of the intraday return process by including appropriate variablesaccounting for the news flow into both the mean and the variance function. This allowsus to differentiate between the consistent price...

We use a dynamic adjustment model and panel methodology to investigatethe determinants of a time- varying optimal capital structure. Because firmsmay temporarily deviate from their optimal capital structure in the presenceof adjustment costs, we also endogenize the adjustment process. In partic...

Banking regulators often practice forbearance and ambiguity in insolvency resolutions. The paperexamines the effects of regulatory forbearance and ambiguity in a context of allocational efficiency.Bailouts, liquidations and their stochastic policy mix lead to suboptimal allocations if banks do...

Financial intermediaries may increase economic efficiency through intertemporal risk smoothing.However without an adequate regulation, intermediation may fail to do this. This paper studiesthe effects of a production shock in a closed economy and compares abilities of market-based andbank-based...

We propose an empirical approach to determine the various economic sourcesdriving the US yield curve. We allow the conditional dynamics of the yield at differ-ent maturities to change in reaction to past information coming from several relevantpredictor variables. We consider both endogenous,...