This paper develops a general equilibrium model of international trade with heterogeneous firms and imperfect credit markets. To finance the costs for product innovation and domestic and foreign market entry, firms must raise external capital. The model underscores the importance of considering...

In this paper, we argue for a regulatory framework under which a bank’s required level of equity capital depends on the equity capital of its peers. Such bankingon- the-average rules are transparent and could also be combined with the current regulatory framework. In addition, we argue that...

The purpose of the tutorial paper is to present a model to value banks. Three traditional models are summarized briefly first. Next, a ‘fundamental' bank valuation model is introduced. Based on sound economics and finance principles, it allows to identify the various sources of value and to...