A theory of systemic risk is outlined for the global financial system, with practical implications for systemic risk mitigation, based on evolutionary economics viewed from an operational behaviour perspective. The paper begins with an introduction to systemic crises and what motivates this...

There are striking and terrifying similarities between the sudden failure of a heart and that of a financial system. In the medical literature, the former is referred to as a sudden cardiac arrest (SCA). By analogy, I refer to its financial counterpart as a sudden financial arrest (SFA). In this...

This paper examines the effectiveness of monetary policy in changing financial environments fostered by financial innovations. Financial innovation can make monetary analysis more complex, and modify the monetary policy transmission mechanism. This makes the monetary policy effective only in the...

This paper examines whether tasking central banks with leaning against asset booms can conflict with their existing mandates to stabilize goods prices and output. The paper embeds the Harrison and Kreps (1978) model of speculative booms in a monetary model based on Rocheteau, Weill, and Wong...

In the discrete-time new-Keynesian model with public debt, Ramsey optimal policy eliminates the indeterminacy of simple-rules multiple equilibria between the fiscal theory of the price level versus new-Keynesian versus an unpleasant equilibrium. If public debt volatility is taken into account...

Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs...

I embed shadow banks in a quantitative general equilibrium model in which limited liability and deposit insurance can lead regulated banks to provide socially inefficient risky loans. Higher capital requirements can eliminate excessive risk at the cost of lower liquidity provision. In general...

We show that a central bank could improve the allocation of resources by delivering the defaulting party's collateral goods to those who consume the most quickly. We base our discussion on Mills and Reed (2012)'s repo contract model, which shows that the consumption of the lender will be the...

Article considers a research problem on the precise measurement of the macroeconomic variables changes in the time domain in the macroeconomics science. We propose to use the three dimensional (3D) wave diagram in the macroeconomics science for the first time, aiming to accurately characterize...

We attempt to explain two stylized facts of the Great Recession, namely the build-up of high leverage in the household sector in the boom phase, deep busts and protracted recovery as rare systemic events. We extend Boz and Mendoza (2014) by explicitly modeling the credit markets and modifying...