Central banks have had an important role in maintaining financial stability through their lender of last resort role. As lender of last resort, the central bank is given enormous power which is normally tempered by a variety of limits. In the most recent crises in both the United States and euro...

This paper gives an overview of the causes of the European debt crisis and the consequences for the external relations. It finds that political mishandling has increased uncertainty, which has contributed to a tendency for the euro to become weaker.

Agency theory is used to evaluate how the European Union (EU) may deal with the resolution of goal and agency conflicts in dealing with failing financial institutions. Experience in the United States suggests that the financial and regulatory structure being put in place, which relies upon...

This paper develops a new and easily implementable necessary and sufficient condition for the exact identification of a Markov-switching structural vector autoregression (SVAR) model. The theorem applies to models with both linear and some nonlinear restrictions on the structural parameters. We...

We add the Bernanke-Gertler-Gilchrist model to a world model consisting of the US, the Eurozone and the Rest of the World in order to explore the causes of the banking crisis. We test the model against linear-detrended data and reestimate it by indirect inference; the resulting model passes the...