The financial crisis has led to the development of an active debate on the use of macro-prudential instruments for regulating the banking system, in particular for liquidity and capital holdings. Within the context of a micro-founded macroeconomic model, we allow commercial banks to choose their...

In the canonical monetary policy model, money is endogenous to the optimal path for interest rates and output. But when liquidity provision by banks dominates the demand for transactions money from the real economy, money is likely to contain information for future output because of its impact...

I outline the missing link in macroeconomic analysis of fiscal policy. While the Office for Budget Responsibility’s (OBR) remit does allow it to judge whether the effects of fiscal (or other economic policies) on potential output are material, such judgements will matter little for the horizon...