The recent financial crisis has forced a rethink of banking regulation and supervision and the role of financial innovation. This paper develops a model where prudent banks may signal their type through high capital ratios. Capital regulation may ensure separation in equilibrium, but deposit...

Over the past decades, cross-border financial flows have increased in importance and have in many occasions exceeded the underlying current account positions. This phenomenon has been accompanied by an increase in the volume of international equity transactions that accentuate the role of...

In an analytically tractable model of the global economy, we calculate the Pareto improvement where a country experiencing a favourable supply side shock consumes more against expected future output and spreads the risk by selling shares. With capital inflows to finance the ‘New Economy’...

This paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict modest current account surpluses in the emerging markets if they face...

Governments through the ages have appropriated real resources through the monopoly of the 'coinage'. In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to an agency of the state, the Central Bank, which may have varying degrees of operational and...

Governments through the ages have appropriated real resources through the monopoly of the "coinage". In modern fiat money economies, the monopoly of the issue of legal tender is generally assigned to an agency of the state, the Central Bank, which may have varying degrees of operational and...

A fall in house prices due to a change in its fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of their planned future consumption of housing services) to those short housing. In a closed...

A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of their planned future consumption of housing services) to those short housing. In a closed economy...

Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy's deficits. The authors consider a dynamic optimising model with costly tax collection and exogenously given public...

Large and growing levels of public debt in the United States, United Kingdom, Japan and the Euro Area raise new interest in the cross-country effects of a large open economy's deficits. The authors consider a dynamic optimising model with costly tax collection and exogenously given public...