This paper develops an open economy portfolio balance model with endogenous asset supply. Domestic producers finance capital goods through credit and bonds in accordance with debt capital costs as well as through equity assets. Private households hold a portfolio of domestic and foreign assets,...

This paper develops an open economy portfolio balance model with endogenous asset supply. Domestic producers choose an optimal capital structure and finance capital goods through credit, bonds and equity assets. Private households hold a portfolio of domestic and foreign assets, shift balances...

We built a real business cycle model with inside money and passive monetary policy that shows some interesting features regarding interest rate dynamics and credit market behavior. We find that the model is stable, a feature that was difficult to find in the literature on passive money. We think...

The argument made in this manuscript is that the two traditional macroeconomic tools, fiscal policy and monetary policy, are insufficient to bring back efficiently into equilibrium an economy that has had a major crisis. Both traditional macro-tools only work through the demand side, and there...

In his Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith (1776) considered the phenomenon of division of labor so enormously significant for the creation of a nation’s wealth that he devoted the first three chapters of his book to an investigation of this process. This is...

I document cyclical properties of aggregate measures of liabilities, equity, and leverage ratio in the U.S. financial sector and those of credit spread. I find that (i) liabilities and equity are procyclical, leverage ratio is acyclical, and credit spread is countercyclical, (ii) financial...