Evidence on the interdependency between monetary policy and the state of thebanking system is scarce. We suggest an integrated micro-macro approach with twocore virtues. First, we measure the probability of bank distress directly at the banklevel. Second, we integrate a microeconomic hazard...

This paper investigates the effect of interest rate policy on stock marketbubbles and trading behavior in experimental asset markets. For this purpose, weintroduce the possibility of investing in interest bearing bonds to the classicallaboratory asset market design of Smith, Suchanek, and...

Just as monetary policy at the strategic level has undergone significant changes over the years, so has its day-to-day implementation. This paper documents the key features of 17 central banks' monetary operating frameworks as of early 2007 and discusses their major developments over the...

The recent crisis was characterized by massive illiquidity. This paper reviews what we know and don't know about illiquidity and all its friends: market freezes, fire sales, contagion, and ultimately insolvencies and bailouts. It first explains why liquidity cannot easily be apprehended through...

Few areas of monetary economics have been studied as extensively as the transmission mechanism. The literature on this topic has evolved substantially over the years, following the waxing and waning of conceptual frameworks and the changing characteristics of the financial system. In this paper,...

A social planner wishes to launch a project but the contenders capable of runningthe project are cash-constrained and may default. To signal their capabilities, thecontenders may finance their bids through debt or equity, depending on the mechanismchosen by the social planner. When moral hazard...

We present and compare two dierent approaches to conditional riskmeasures. One approach draws from convex analysis in vector spaces andpresents risk measures as functions on Lp spaces, while the other approachutilizes module-based convex analysis where conditional risk measures aredened on Lp...

This paper investigates the determinants of a broad sample of Swiss non-financial firms’cash holdings between 1995 and 2004. The median Swiss firm holds almost twice asmuch cash and cash equivalents as the median U.S. or U.K. firm. Our results indicate thatasset tangibility and firm size are...

Marginal propensity to consume food out of food stamps in the US is higher than that out ofcash income. We explain this in terms of differential impact of cash income and in-kindtransfers on intra-household division of cash. We develop a Cournot model of a multi-personhousehold where food...