interest, so an economy is much closer to the ZLB. However, an unconventional credit policy, that consists on central bank … the economy from reaching the ZLB. Since central bank loans are not subject to the moral hazard problem between bankers … reduced due to a relatively stronger inflation reduction, which in turn reduces entrepreneurs' incentives to demand bank loans. …

We provide a rationale for bank money creation in our current monetary system by investigating its merits over a system …) costs from monitoring, aggregate lending to bank-dependent firms is inefficiently low. A monetary system with bank money … creation alleviates this problem, as banks can initiate lending by creating bank deposits without relying on household funding …

undercapitalisation, and the misallocation of credit. In our model, credit traps arise when shocks to bank equity capital tighten banks … productivity weakens bank capital generation, reinforcing tight borrowing constraints, sustaining the credit trap steady state …, restrictions on bank leverage can help to enhance the economy's resilience to the shocks that can cause credit traps. Further, a …

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 insolvent banks. The major results that our model produces are as follows: (1 …

rationale for constructive ambiguity. Key results are that if contagion (moral hazard) is the main concern, the Central Bank (CB … alone. The CB`s optimal policy may be non-monotonic in bank size …

This paper develops a model of the lender of last resort (LOLR). In a simple one-period setting, the Central Bank (CB … the likelihood of a bank requiring LOLR being insolvent in each period is a function of CB's prior actions, since these … time varying and contingent on the probabilities and effects of failure and of the likelihood of a bank requiring LOLR …

heterogeneous and depended on the financial features of banks’ balance sheets; as its business becomes more diversified as a bank … that investors’ evaluation approach of the risk-inducing effect of the accommodative policy on bank has been changing over …