In this paper we consider emergency government bailouts. We show that it is welfare‐enhancing to bail out failing firms that are facing a sudden negative demand shock and would otherwise go bankrupt, when there are sufficiently large fixed production costs and knock‐on effects (the negative...

In the context of the trilemma hypothesis, this paper documents heterogeneous responses to international monetary shocks, emphasizing an important role of inflation. Periphery countries’ monetary policy autonomy is subject to their inflation. When the center country increases the interest...