Market distress can be the catalyst of a deleveraging wave, as in the 2007/08 financial crisis. This paper demonstrates how market distress and deleveraging can fuel each other in the presence of adverse selection problems in asset markets. At the core of the detrimental feedback loop is agents'...

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information on member states' potential output and (ii) bail-out among member states. The first-best deficit is contingent on the cycle, that is, on member states' output gap. In the presence of asymmetric...

We analyze fiscal rules within a Monetary Union in the presence of (i) asymmetric information about member states' potential output and, therefore, output gap and (ii) bail-out among member states. In our framework, bail-out lowers the scope for signalling (discrimination) by member states...

In this paper we address the issue of how transmission uncertainty could affect the choice between a federal monetary policy based on national data and one on aggregated data.We find that the uncertainty about the transmission process increases the need to take into account information about...

In this paper we address the issue of how transmission uncertainty could affect the choice between a federal monetary policy based on national data and one on aggregated data. We find that the uncertainty about the transmission process increases the need to take into account information about...