Fluctuations in banks' due diligence are increasingly viewed as a force driving the buildup and unfolding of crises. In a dynamic general equilibrium model, we show that banksí access to retail and wholesale liquidity and the values of loan portfolios govern banks' incentives and effectiveness...

This paper develops a model that relates entry into the underground economy to tax rates and the need to access the banking system. The model uses a dynamic approach in which both firms and banks optimize and in which the benefits to a firm of accessing the banking system are endogenous. A firm...

This paper develops a model that relates businesses’ entry into the underground economy to tax rates and the need to access the banking system. The model uses a dynamic approach in which both firms and banks optimize and in which the benefits to a firm of accessing the banking system are...