This paper develops a model of banking frictions and banking risk, the importance of which is highlighted by the recent Global Financial Crisis (GFC). As a sort of systemic risk, changes in banking risk lead to fluctuations in aggregate economic activity. We propose a model-based approach to...

This paper studies the role played by distribution costs in shaping exchange rate behavior over the business cycle. We assume, realistically, that transactions on tradable goods require a component of nontradable distribution services. This naturally drives a wedge between retail prices in...