This paper establishes a theoretical model to examine the LOLR policy when a central bank cannot distinguish between solvent and insolvent banks. We study two cases: a case where the central bank cannot screen insolvent banks and a case where the central bank can only imperfectly screen...

This paper studies contagion and market freezes caused by uncertainty in financial network structures and provides theoretical guidance for central banks. We establish a formal model to demonstrate that, in a financial system where financial institutions are interconnected, a negative shock to...

The Financial Crisis accelerated a latent Fiscal Crisis that had been brewing in many Western countries. The paper outlines the causes of the Financial Crisis, and how this increased expenditure and reduced revenues for many Western governments. But these additional fiscal stresses merely...