Economics is not a hard science, subject to controlled experiments. In their absence, we economists construct narratives to explain events, often involving key sound bites. Among the sound bites of the financial crisis are the following: “Separate the casino from the utility bank”;...

Mainstream macro-models have assumed away financial frictions, in particular default. The minimum addition in order to introduce financial intermediaries, money and liquidity into such models is the possibility of default. This, in turn, requires that institutions and price formation mechanisms...

The second half of AUgust 1998 was dominated by two events. From 14 to 28 August the Hong Kong Monetary Authority (HKMA) intervened in the Hong Kong equity markets to prevent a speculative double play against their currency board. On 17 August Russia announced its default on sovereign bonds....

Now is a good time to take stock of progress in the reform of financial regulation. Much has been happening. The monumental Dodd-Frank Act was passed by the US Congress in July 2010. The deliberations and conclusions of the Basel Committee on Banking Supervision (BCBS) and the Financial...

The Evolution of Central Banks employs a wide range of historical evidence and reassesses current monetary analysis to argue that the development of non-profit-maximizing and noncompetitive central banks to supervise and regulate the commercial banking system fulfils a necessary and natural...

Most of those who take macro and monetary policy decisions are agents. The worst penalty which can be applied to these agents is to sack them. Agents thus have loss functions which are bounded above. We work with a bell loss function which has this property. With additive uncertainty the...