Lending retail deposits to SMEs and household borrowers may be the traditional role of commercial banks: but banking in Britain has been transformed by increasing consolidation and by the lure of high returns available from wholesale Investment activities. With appropriate changes to the...

This paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict modest current account surpluses in the emerging markets if they face...