Macroeconomists have traditionally ignored the behavior of temporary price markdowns ("sales") by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out. We challenge this view. First, using the 1996 -...

Technology has been a game changer, and with its advancement things around us have changed drastically offering comfort and convenience. The Smartphone has brought about a change in our lives facilitating ordering food, groceries, movie ticket or cab booking with just a few clicks. The Mobile...

In this article, the discussion on quality levels in the monetary search theoretical model is extended. By having quality levels endogenously determined, we found that whether money holders have quality preferences is crucial to the results. While the effect of the fraction of money on quality...

Standard banking theory suggests that there exists an optimal level of credit risk that yields maximum bank profit. We identify the optimal level of risk-weighted assets that maximizes banks’ returns in the full sample of US banks over the period 1996–2011. We find that this optimal level is...

This paper examines empirically the role of bank market power as an internal factor influencing banks’ reaction in terms of lending and risk-taking to monetary policy impulses. The analysis is carried out for the US and euro-area banking sectors over the period 1997-2010. Market power is...

The Fed’s actions before and after the housing bubble burst: discretion and mandate of central banks in an environment of financial deregulation The Fed’s actions during the development and burst of the US real estate bubble highlight a Central Bank’s dilemma when facing a financial...

We build a general equilibrium model to analyze how the ability of banks to create money can affect asset prices and financial stability. In the model, demand for liquidity takes the form of demand for money to make payments. We show that banks can provide elastic aggregate liquidity by creating...

Purpose – The purpose of this paper is to examine the effects of policy options in financial dynamics (of money, credit, efficiency and size) on consumer prices. Soaring food prices have marked the geopolitical landscape of African countries in the past decade. Design/methodology/approach –...

Purpose – The purpose of this paper is to relate the marginal crisis risk of Woodford to a number of financial fragility indicators. The paper expands the interest rate gap approach by considering the capital structure of investments and systemic risk, dating back to Modigliani-Miller. The...

Levels of interest rates below historical norms may have enhanced financial instability in both developed and in developing economies during the 2000´s. The risk-taking channel of monetary transmission policy is a recent theory that explains theinteraction between risk perceptions of the...