Real liquidity refers to the real purchasing power of the monetary base. In an economy where banks only take money as deposits, insufficient real liquidity constrains the price level when there is a liquidity shock before banks settle their long-term loan contracts. This leads to strictly...

Introducing shadow banks into the economy lowers the money supply measured as the sum of cash and deposits, while the amount of payment liquidity does not decrease as long as the liabilities of shadow banks remain fully liquid. At the same time, the total amount of credit available to firms...

We analyze the interaction between managerial decisions and firm value/asset prices by embedding the standard agency model of the firm into an otherwise standard asset pricing model. When the manager-agent's compensation depends on the firm's stock price performance, stock prices are set to...

quot;Risk managementquot; in securities markets refers to the oversight of portfolio managers and professional traders when they trade on behalf of investors in security markets. Monitoring of their trading performance, profit and loss, and risk-taking behavior, is measured by principals using...

Private information about prospective borrowers produced by a bank can affect rival lenders due to a quot;winner%u2019s cursequot; effect. Strategic interaction between banks with respect to the intensity of costly information production results in endogenous credit cycles, periodic quot;credit...

We study the interactions between the two roles of commercial banks as payment intermediaries and credit intermediaries. Deposits serve as a medium of exchange, and depositors with liquidity shocks may pay with deposits for real consumptions without withdrawing cash from the banking system....

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

In the last forty or so years the U.S. financial system has morphed from a mostly insured retail deposit-based system into a system with significant amounts of wholesale short-term debt that relies on collateral, and in particular Treasuries, which have a convenience yield. In the new economy...

Based on archival and survey data we show that the maturity of U.S. business loans has been continuously increasing since the mid-1930s when banks invented the term loan. Concurrently, bank innovation first involved the invention of credit analysis and covenant design. Later, bank innovation...