We study how discount window policy affects the frequency of banking crises, the level of investment, and the scope for … indeterminacy of stationary equilibrium and to inefficiently low levels of investment. We show how offering discount window loans at …. Banking crises occur with positive probability in this equilibrium and the level of investment is suboptimal, but a proper …

between the federal funds rate and investment, or output more generally. Economic policy uncertainty, however, does have a … negative and statistically significant effect on investment in the estimated model. I argue that the results support an option … theory view of investment rather than the standard New Keynesian model. Also, various specifications of the model demonstrate …