This paper argues that the stock market is an important channel of monetary policy. Monetary policy affects real economic activity because inflation levies a property tax on stocks in addition to an income tax on dividend payments. Inflation thus taxes stocks more heavily than it does bonds....

Cosimano (2003) uses the perturbation method to approximate optimal experimentation problems in the neighborhood of the augmented linear regulator problem as formulated by Hansen and Sargent (2004) and Anderson, Hansen, McGratten and Sargent (1966). Cosimano and Gapen (2005) develop a computer...

The unfolding subprime crisis and the challenges facing central banks in using monetary policy to resolve the possible credit crunch, highlight the importance of understanding the relationship between monetary policy and risk-based capital requirements. We explore the implications of risk-based...

The perturbation method is used to approximate optimal experimentation problems. The approximation is in the neighborhood of the linear regulator (LR) problem. The first order perturbation of the optimal decision under experimentation is a combination of the LR solution and a term that captures...

Financial instruments are subject to inflation taxes on the wealth they represent and on the nominal income flows they provide. This paper explicitly introduces financial instruments into the standard stochastic growth model with money and production and shows that the value of the firm in this...

Drawing from a unique data set comprising 2,893 banks and 152 countries over the period 1987 to 2000, we test whether the adoption of the Basel Accord by Latin American and Caribbean countries was responsible for the serious slowdowns in credit growth experienced by these countries. We find...