Systematic differences in the timing of wage setting decisions among industrialized countries provide an ideal framework to study the importance of wage rigidity in the transmission of monetary policy. The Japanese Shunto presents the most well-known case of bunching in wage setting decisions:...

This paper develops a new instrumental-variable (IV) approach to estimate the effects of different exchange rate regimes on bilateral outcomes. The basic idea is that the characteristics of the exchange rate regime between two countries (exchange rate variability, fixed or float, autonomous or...

We show, in a monetary exchange economy, that asset prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank, through its effect on default and interest rates. Two agents trade goods and nominal assets to smooth consumption across periods and...

This paper contains a general equilibrium model of an economy with incomplete markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a central bank, a government and a regulator. The model is used to analyse...

The Basel Committee on Banking Supervision is proposing to introduce, in 2006, new risk-based requirements for internationally active (and other significant) banks. These will replace the relatively risk-invariant requirements in the current Accord. This article examines the implications of this...

Not only in the classic Arrow-Debreu model, but also in many mainstream macro models, an implicit assumption is that all agents honour their obligations, and thus there is no possibility of default. That leads to well-known problems in providing an essential role for either money or for...

Our purpose in this paper is to produce a tractable model which illuminates problems relating to individual bank behaviour and risk-taking, to possible contagious interrelationships between banks, and to the appropriate design of prudential requirements and incentives to limit ‘excessive’...

The objective of this paper is to propose a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction between banks, recognising that the actual risk to which an individual bank is exposed also depends on its interaction with other banks and other private...

We show, in an exchange economy with default, liquidity constraints and no aggregate uncertainty, that state prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is derived along the lines of Dubey and Geanakoplos (1992). Two...

We revisit Western Europe’s record with labour-productivity convergence, and tentatively extrapolate its implications for the future path of Eastern Europe. The poorer Western European countries caught up with the richer ones through both higher rates of physical capital accumulation and...