What factors cause banks to lend to the private sector in a bank-based financial system like the ones in place in Europe? In this paper we compare a traditional demand oriented model to a non-traditional capital budgeting model of bank lending based on movements in the equity cost of capital for...

The financial and economic crisis of 2007-2011 in the U.S. and Europe raises a number of fundamental questions on the role of banks in the financial system. The response so far has resulted in a reregulation of banks and certain systematically important non-bank financial institutions. One...

This paper formulates and tests a model that describes the asset and financing adjustments of U.S. non-financial enterprises over the twentieth century. Asset adjustments change the expected income and operating risk of firms while financing adjustments change the financial risk. To protect debt...

This article is a review of a 531 page book that in turn is a review and evaluation of the 2,319 page Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Congress on July 16, 2010. The overriding theme of the book is to pose two approaches to attaining financial stability in the...

In this paper we show that in a world where productive investment is allocated according to the CAPM, a fractional reserve banking system that facilitates investing and money creation is not Pareto efficient and leads to excessive productive investment that in turn amplifies future business...

In this paper I compare a traditional demand oriented model of bank lending with its focus on short-term interest rates in the money market, to a non-traditional capital budgeting model of bank lending based on movements in share valuations for the Euro area. Using non-nested hypothesis tests,...

In this paper I compare a capital budgeting model of of bank lending based on stock valuations to a supply/demand model based on an interest rate channel for France and Germany using non-nested hypothesis tests and omitted variables tests. For France both tests indicate a strong rejection of the...

Fifty years ago Milton Friedman published a book entitled A Program for Monetary Stability. In it he outlined a number of suggestions for the conduct of monetary and fiscal policies that he thought would contribute to monetary stability and pari passu to price stability and a greater degree of...

This paper presents a theory of corporate finance from the perspective of bondholders. Towards this end an equilibrium model of a debt and equity financed firm is developed that motivates the need for an upfront bond contract that solves an agency problem between bondholders and stockholders....

This paper formulates and empirically tests a model that describes the balance sheet adjustments of debt and equity financed U.S. nonfinancial enterprises over the twentieth century. In this model asset adjustments change the expected income and operating risk of firms while financing...