This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for a comprehensive assessment of regulatory and monetary policy, as well as welfare analysis in the different sectors of the economy. Due to liquidity and endogenous default, the...

Book Review

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from...

We investigate how corporate legacy debt, through heterogeneous household portfolios, affects monetary policy's ability to control inflation. We find that (1) corporate debt generates an income effect that counters the traditional substitution effect, reducing the effectiveness of rate changes...

Now is a good time to take stock of progress in the reform of financial regulation. Much has been happening. The monumental Dodd-Frank Act was passed by the US Congress in July 2010. The deliberations and conclusions of the Basel Committee on Banking Supervision (BCBS) and the Financial...

On 3 December EY hosted a SUERF conference on banking reform with Sir Howard Davies, the Chairman of RBS, and Dame Colette Bowe, the Chairman of the Banking Standards Board, as the two keynote speakers. Professor David Miles (Imperial College) gave the SUERF 2015 Annual Lecture on Capital and...

Central Bankers are currently facing big challenges in designing and implementing monetary policy, as well as with safeguarding financial stability, with the world economy still in the process of digesting the legacy of the crisis. The crisis has changed central banking in many ways: by shifting...

[Highlights] For the full references and the annex, please see the PDF version of this publication. In the aftermath of the global financial crisis, the market share of US investment banks is increasing, while that of their European counterparts is declining. We present evidence that US...

A sizeable proportion of enterprises, especially SMEs, assisted by the government, will fail to repay. Should a screening mechanism then be applied to deter those most likely to default from seeking such financial assistance? The answer depends on the relative weights attached to the competitive...