The classical Bagehotu0092s conception of a Lender of Last Resort (LOLR) that lends to illiquid banks has been criticized on two grounds: on the one hand, the distinction between insolvency and illiquidity is not clear cut; on the other a fully collateralized repo market allows Central Banks to...

We model the impact of bank mergers on loan competition, banks' reserve holdings and aggregate liquidity. Banks compete in a differentiated loan market, hold reserves against liquidity shocks, and refinance in the interbank market. A merger creates an internal money market that induces financial...

We evaluate the Friedman-Schwartz hypothesis that a more accommodative monetary policy could have greatly reduced the severity of the Great Depression. To do this, we first estimate a dynamic, general equilibrium model using data from the 1920s and 1930s. Although the model includes eight...

This paper provides a simple weekly model of the regular supply of liquidity in the euro area, with a view to understanding the functioning of the euro area money market. The main result of the analysis is that liquidity has normally been provided by the ECB in a neutral and smooth manner, but...

This paper analyses the information content of M1 for euro area real GDP since the beginning of the 1980s and reviews theoretical arguments on why real narrow money should help predict real GDP. We find that, unlike in the U.S., in the euro area, M1 has better and more robust forecasting...

A number of authors have attemted to test whether the U.S. economy is in a determinate or an indeterminate equilibrium. We argue that to answer this question, one must be impose a priori restrictions on lag length that cannot be tested. We provide examples of two economic models. Model 1...

Some committees convene behind closed doors while others publicly discuss issues and make their decisions. This paper studies the role of open and closed committee decision making in presence of external influence. We show that restricting the information of interest groups may reduce the bias...

On several occasions during the period 2001-2003, the European Central Bank (ECB) decided to deviate from its "neutral" benchmark allotment rule, with the effect of not alleviating a temporary liquidity shortage in the banking system. This is remarkable because it implied the possibility of...

After the switch to a floating exchange rate in 1973, the Swiss National Bank at first adopted annual monetary targets and in the 1990s shifted to a medium-term targeting strategy. In this paper I review the SNBu0092s internal policy analysis, an aspect of Swiss monetary targeting that has...