This paper considers the aggregate performance of the banking industry, applying a modified and extended dynamic decomposition of bank return on equity. The aggregate performance of any industry depends on the underlying microeconomic dynamics within that industry --- adjustments within banks,...

This paper shows that optimal policy and consistent policy outcomes require the use of control-theory and game-theory solution techniques. While optimal policy and consistent policy often produce different outcomes even in a one-period model, we analyze consistent policy and its outcome in a...