We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. The endogenous benefit of opacity is lower fragility when profitability is expected to...

We present a gravity model that accounts for multilateral resistance, firm heterogeneity and country-selection into trade, while accommodating asymmetries in trade flows. A new equation for the proportion of exporting firms takes a gravity form, such that the extensive margin is also affected by...

We examine macroprudential bank capital policy in a macroeconomic model with a financial accelerator originating in the banking sector. Under Ramsey-optimal policy, the bank capital buffer tracks closely a model-based measure of the credit gap, defined as the gap between equilibrium credit in...

We construct an overlapping generations macroeconomic model with which to study the causes, consequences and remedies to ‘credit traps' — prolonged periods of stagnant real activity accompanied by low productivity, financial sector undercapitalisation, and the misallocation of credit. In our...

The global financial crisis prompted the rapid development of macro-prudential frameworks and an increased reliance on borrower-based policy tools, which influence the demand for credit. This paper studies the optimal design of one such tool, a loan-to-value (LTV) limit, and its implications for...