Credit constraints that link a private agent’s debt to market-determined prices embody a credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. The externality arises because agents fail to internalize the...

The paper identifies based on the monetary overinvestment theories by Wicksell (1898), Mises (1912) and Hayek (1929) monetary policy mistakes in large industrial countries issuing international currencies. It its argued that a neglect towards monetary policy reform in a world dominated by...

This paper analyses the relations between the banking system fluctuations, on one hand, and taxation and public spending, on the other one, using a VECM methodology. We find some evidence of prociclicality of fiscal policy using variables such as government spending, taxes, and primary surplus....