Present paper addresses the issue of the short and long run determination of the exchange rates in the Redux model of Obstfeld and Rogoff (1995). Current extension of the Redux model includes the investment projects that simultaneously can serve as investment allocation subject to the capital...

Current paper proposes an extension of the seminal model by Holmstrom Tirole (1997) of the exogenous liquidity supply in presence of moral hazard to the case that includes private asset recovery under the limited liability of the entrepreneur. In our model partial private recovery applies to the...

Classical models of inflation, utilising the transactions-based demand for money, predict that monetary policy will be ineffective in changing real variables. In response to this, the New Keynesian sticky-price models assume price-rigidity in order to address the possibility for the existence of...