We develop a macroeconomic model in which the balance sheet/liquidity condition of financial institutions plays an important role in the determination of asset prices and economic activity. The financial intermediaries in our model are required to make investment commitments before a complete...

The macroeconomic policy response to the global financial and economic crisis has brought interest rates (close to) zero and the public debt to record levels despite institutionalized monetary and fiscal polity rules. The paper discusses the long-term implications of asymmetric fiscal and...

The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment. We show that a...

In the discrete-time new-Keynesian model with public debt, Ramsey optimal policy eliminates the indeterminacy of simple-rules multiple equilibria between the fiscal theory of the price level versus new-Keynesian versus an unpleasant equilibrium. If public debt volatility is taken into account...

This article first examines the composition of the shadow banking system in China and then critically analyses its interconnectivity with the traditional banking system and global capital markets. It argues that whilst shadow bank lending in China contributes to the country's economic growth,...

In recent years, U.S. government entities have become increasingly active as commercial participants in corporate restructurings by providing rescue loans when private market funding is unavailable. Like private lenders, the government can effectively control the operations of distressed...

The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment. We show that a...

Larry Summers' re-use of the phrase appears justified in the present global economic climate since many factors contribute to comparatively poor OECD economic performance and weakening macroeconomic policy instruments. Some are measurement issues and others might be seen as the downsides of...

Abstract I consider a small open economy model where international financial markets are imperfect and the exchange rate is determined by capital flows. I use this framework to study the effects of portfolio flow shocks, derive the optimal foreign exchange intervention policy, and...

The association between economic and financial stabilities and influence of macroeconomic policies on the financial sector creates scope of active policy role in financial stability. As a contribution to the existing body of knowledge, this study has analysed the implications of macroeconomic...