The USD asset share of non-U.S. banks captures the demand for dollars by these investors. An instrumental variable strategy identifies a causal link from the USD asset share to the USD exchange rate. Cross-sectional asset pricing tests show that the USD asset share is a highly significant...

A baseline integration of commercial banks into the disequilibrium framework with behavioral traders of Charpe et al. (2011, 2012) is presented. At the core of the analysis is the impact the banking sector exerts on the interaction of real and financial markets. Potentially destabilizing...

This paper investigates quantitative significance of liquidity constraints for asset prices and monetary policy in a monetary economy version of Kiyotaki and Moore (2005). Motivated by the lack of commitment in the intertemporal asset trade, the model economy features limited resalability of...