This paper analyses the welfare effects of microfinance and inflation in developing countries. Therefore, we introduce a moral hazard problem into a monetary search model with money and credit. We show how access to basic financial services affects households' decisions to borrow, to save and to...

In this paper we develop a simple two-period model that reconciles credit demand and supply frictions. In this stylized but realistic model credit and deposit markets are interlinked and credit demand and credit supply frictions amplify each other in such a way that produces in equilibrium very...

We provide a rationale for bank money creation in our current monetary system by investigating its merits over a system with banks as intermediaries of loanable funds. The latter system could result when CBDCs are introduced. In the loanable funds system, households limit banks' leverage ratios...

This paper examines how financial constraints affect redistribution via monetary policy. We explore a novel mechanism of monetary non-neutrality, which is based on debt limits imposed in nominal terms. Specifically, when debt is constrained by current income, monetary policy can alter the real...

The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...

The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...

This paper examines how financial constraints affect redistribution via monetary policy. We explore a novel mechanism of monetary non-neutrality, which is based on debt limits imposed in nominal terms. Specifically, when debt is constrained by current income, monetary policy can alter the real...

This paper provides a framework to analyse emergency liquidity assistance of central banks on financial markets in response to aggregate and idiosyncratic liquidity shocks. The model combines the microeconomic view of liquidity as the ability to sell assets quickly and at low costs and the...

Central bank or International Monetary Fund lending should be regarded as a line of credit, analogous to private line-of-credit products. Contractual provisions in private line-of-credit arrangements are designed to control managerial moral hazard and provide a means for profit-maximizing...

In this paper I investigate the risk-taking channel of the monetary policy in the U.S. during the period of Large Scale Assets Purchases (LSAPs) programs; from November 2008 to September 2014. Using High-Frequency Identification (HFI) estimates of the monetary policy stance and constructed data...