We identify the origin of the contradicting perspectives on credit creation offered by Austrian, Mainstream and Post Keynesian economists as the neglect of the primacy of such assets as goods, properties and securities, which always pre-exist any transaction and loan. We develop a unified...

How countercyclical macroprudential credit policies affect the loan spread? To answer this question, we propose a microeconomic model of bank competition that contemplates differences in the behavior of public and private banks and the peculiarities of the market for corporate loans vis-a-vis...

This paper studies a modern monetary economy: trade in both goods and securities relies on money provided by intermediaries. While money is valued for its liquidity, its creation requires costly leverage. Inflation, security prices and the transmission of monetary policy then depend on the...

This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital. When policy-makers inject equity capital during financial crises, they...

What determines the technology that a country adopts? While there could be many factors, the efficiency of the country's financial system may play a significant role. To address this question, a dynamic contract model is embedded into a general equilibrium setting with competitive...

This paper studies optimal bank capital requirements in a model of endogenous bank funding conditions. I find that requirements should be higher during good times such that a macroprudential "buffer" is provided. However, whether banks can use buffers to maintain lending during a financial...

What is the role of a country's financial system in determining technology adoption? To examine this, a dynamic contract model is embedded into a general equilibrium setting with competitive intermediation. The terms of finance are dictated by an intermediary's ability to monitor and control a...

Countercyclical bank capital requirements have emerged as a popular regulatory tool to help smooth financial cycles. The idea is to reduce capital requirements when exogenous shocks cause aggregate bank capital to decrease so that regulation does not needlessly constrain banks' supply of credit....

Using information from the balance sheets of Spanish banks between 1995 and 2009 matched to credit information at the bank-industry and bank-firm level, we estimate the average impact of current and anticipated changes in banks' capital on lending to firms. We isolate the role of credit supply...

This paper examines the role of bank capital in monetary policy transmission in India during the post-global financial crisis period. Empirical results show that banks with higher capital to risk-weighted assets ratio (CRAR) raise funds at a lower cost. Additionally, banks with higher CRAR...