We develop a continuous-time stochastic growth model with recursive preferences, money and public debt. In equilibrium growth and inflation follow geometric Brownian motions, with parameters determined by solving a system of nonlinear equations. Permanent changes in government expenditures and...

This paper uses a stochastic growth model with consumption, saving, portfolio choice between real capital and government bonds and money holding as a cash-in-advance constraint. It shows that money supply changes due to government expenditure changes or open market operations are never...

We consider a simple general equilibrium model for the determination of asset prices together with full equilibria in the commodity and money markets. In this way portfolio aspects are introduced into a dynamic macro model which has many features from growth theory. Money holdings are modelled...

Many monetary and fiscal policy decision makers and economists hold the view that exchange rates are volatile even though nominal exchange rates vary less than many other financial market prices and yields. This paper seeks an explanation for this puzzle by contrasting exchange rate dynamics in...

In this paper we develop a stochastic monetary growth model with exogenous productivity shocks to consider the effects of changes in the financing structure of government deficits on the key variables of the economy. We study how the presence of supply-side uncertainty affects the equilibrium of...

The authors consider a dynamic stochastic general equilibrium model with a representative consumer-investor and two producing firms. All the assets are real investments of capital into productive processes. Government expenditures, taxes, and money financing are explicitly incorporated. The...

We find that firms with greater tax avoidance incur higher spreads when obtaining bank loans. This finding is robust in a battery of sensitivity analyses and in two quasi-experimental settings including the implementation of Financial Accounting Standards Board Interpretation No. 48 and the...

This paper examines what institutional and bank-specific factors determine bank stock price synchronicity. Using data on 37 countries from 1996–2007, we find that bank stocks are more aligned with the whole market (1) during the financial crisis; (2) in countries that have more credit provided...

We investigate the effects of credit ratings-contingent financial regulation on foreign bank lending behavior. We examine the sensitivity of international bank flows to debtor countries’ sovereign credit rating changes before and after the implementation of the Basel 2 risk-based capital...

Countercyclical country interest rates have been shown to be both a distinctive characteristic and an important driving force of business cycles in emerging market economies. In order to account for this, most business cycle models of emerging market economies have relied on ad hoc and exogenous...