There is a demand for safe assets, either government bonds or private substitutes, for use as collateral. Government bonds are safe assets, given the government's power to tax, but their supply is driven by fiscal considerations, and does not necessarily meet the private demand for safe assets....

This paper contains a general equilibrium model of an economy with incomplete markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a central bank, a government and a regulator. The model is used to analyse...

This paper studies the reactions of commercial banks to the changes in monetary policy tools in mid-1994, when the Federal Reserve Bank altered its policy implicitly targeting the Federal Funds Rate (FFR). Prior to 1994, the FFR had affected, with a considerable lag, the Prime Rate. However,...

This paper develops a micro-founded general equilibrium model of the financial system composed of ultimate borrowers, ultimate lenders and financial intermediaries. The model is used to investigate the impact of uncertainty about the likelihood of governmental bailouts on leverage, interest...

This article surveys the macroeconomic implications of financial frictions. Financial frictions lead to persistence and when combined with illiquidity to non-linear amplification effects. Risk is endogenous and liquidity spirals cause financial instability. Increasing margins further restrict...

In this paper we consider the relationship between output, the price level and the Central Bank's broad money aggregate, M2, which is a simple sum of six 'monies'. We consider by way of comparison a divisia index, which we adjust to allow, in the alternatively and conceptually divergent ways,...

In this paper, we study the relationship between welfare and real interest rates in Aiyagari and Williamson's (2000) setting. They developed a dynamic insurance contract model with an incomplete market monetary economy and demonstrated that the optimal inflation rate is positive. This paper...

We extend Ross and Cooper (1998) and find an adequate liquidate provision as a function of liquidity cost in CRRA (Constant Relative Risk Aversion) environment. Our study shows that a RPC (run preventing contract) in a MMMF (money market mutual fund) requires a higher amount of liquidity...

La Bundesbank et la Banque de France ont organisé les 19 et 20 mai derniers à Hambourg leur troisième conférence conjointe. Cette conférence portait sur les défis que la politique macroéconomique doit relever à court et à long terme, dans ses volets monétaire, budgétaire et fiscal.

The generation and implementation of ideas, or knowledge, is crucial for economic performance. We study this process in a model of endogenous growth with frictions. Productivity increases with knowledge, which advances via innovation, and with the exchange of ideas from those who generate them...