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Modern financial sectors consist of banks, asset markets and a central bank. This paper builds a model where these institutions provide different financial services, and their interaction supports efficient allocations. When one institution is missing equilibria are, by construction,...
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This paper studies the optimal bankruptcy policy for repurchase agreements (repos) with respect to their exemption from the automatic stay of bankruptcy. The exemption from automatic stay has been one of the key contributors to the development of the repo market as a major source of funding for...
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We present an example of a small open economy where small increases in the world interest rate may induce a sharp decline in output and a precipitous depreciation of the exchange rate. Due to a costly state verification problem in domestic credit markets, combined with unrestricted international...
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