The Bolivian puzzle is high and persistent financial dollarization notwithstanding deep macroeconomic stabilization that achieved stable and low inflation and the regulations encouraging domestic currency deposits. We analyze traditional and new approaches to explain dollarization in Bolivia. We...

Central banks have a variety of tools for implementing monetary policy, but the tool that has received the most attention in the literature has been the overnight interest rate. The financial crisis that erupted in the summer of 2007 has refocused attention on other channels of monetary policy,...

An increasing number of central banks implement monetary policy via two standing facilities: a lending facility and a deposit facility. In this paper we show that it is socially optimal to implement a non-zero interest rate spread. We prove this result in a dynamic general equilibrium model...

We introduce an approach for the empirical study of the quantity theory of money (QTM) that is novel both with respect to the specific steps taken as well as the general methodology employed. Empirical studies of the QTM have focused directly on the relationship between the rate of change of the...

TARGET2 ist seit gut einem Jahr Zielscheibe massiver akademischer Kritik. Wir legen dar, dass TARGET2 keiner Veränderungen bedarf. Die Salden sind keine echten Kredite und sollten nicht als solche betrachtet werden. Die zugrunde liegenden ökonomischen Probleme sind weder hinreichend noch...

To deal with changes of capitalized seignorage due to EMU, we supply the still missing capital-theoretical framework. We show that seignorage pooling of EMU is composed of two components, a dynamic component and a static component. By its dynamic component, the pool provides insurance against...

In order to provide a tool for risk management improvement and appropriate regulation, a methodology for measuring interest rate risk is applied in this paper. After estimating and simulating the interest rate term structure, the value at risk and expected shortfall are calculated on a...

There is substantial heterogeneity in the structure of trading relationships in the U.S. overnight interbank lending market: Some banks rely on spot transactions, while most form stable, concentrated borrowing relationships to hedge liquidity needs. As a result, borrowers pay lower prices and...

The paper considers the experience of the European Investment Bank and addresses policy lessons for developing countries as they seek finance for development. The paper argues that the key lesson for developing countries is that the traditional role of a development bank in closing market gaps...

An increasing number of central banks implement monetary policy via a channel system or a floor system. We construct a general equilibrium model to study the properties of these systems. We find that the optimal framework is a floor system if and only if the target rate satisfies the Friedman...