We show that a liquidity shock can affect the solvency of a bank and cause its default if the bank does not hold enough liquid assets. The model we propose is an extension of Merton (1974) model and consists of assessing a probability of default over one and two (short) periods relative to the...

In order to assess the effect of fiscal rules in Stage Three of EMU for France and Germany, Bayoumi and Eichengreen's (1992) structural VAR analysis is extended by including the general government financial surplus and conditioning by external variables. This allows a distinction between fiscal...

The objective of the paper is to investigate to what extent business cycles co-move in Germany, France and Italy. We use a large-scale database of non-stationary series for the euro area in order to assess the effect of common versus idiosyncratic shocks, as well as transitory versus permanent...