The purpose of this paper is to assess the choice between adopting a monetary base or an interest rate setting instrument to maintain financial stability.  Our results suggest that the interest rate instrument is preferable, since during times of a panic or financial crisis the Central Bank...

This paper explores the business cycle implications of financial distress and bankruptcy law. We find that due to the presence of financial imperfections the effect of liquidations on the price of capital goods can generate endogenous fluctuations. We show that a law reform that...

This paper asks how well a general equilibrium agency cost model describes the dynamic relationship between credit variables and the business cycle. A Bayesian VAR is used to obtain probability intervals for empirical correlations. The agency cost model is found to predict the leading,...

This paper incorporates limited asset markets participation in dynamic general equilibrium and develops a simple analytical framework for monetary policy analysis. Aggregate dynamics and stability properties of an otherwise standard business cycle model depend nonlinearly on the degree of asset...

After the global financial crisis, there is greater awareness of the need to understand the interactions between the financial sector and the real economy and hence the potential for financial instability.  Data from the financial flow of funds, previously relatively neglected, are now seen as...

The article aims to present and discuss estimates of levels of human and social capital in Italy's regions over the long term, i.e. roughly from the second half of the nineteenth century up to the present day.  The results are linked to newly available evidence for regional value added in order...

This paper addresses the problem of estimating the aggregate international demand schedule for emerging market (EM) securities as an asset class. The standard ‘push-pull’ model of capital flows is modified by reference to recent work on portfolio choice in the context...

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from...

This paper proposes that all new euro area sovereign borrowing be in the form of jointly guaranteed Eurobonds.  To avoid classic moral hazard problems and to insure the guarantors against default, each country would pay a risk premium conditional on economic fundamentals to a joint debt...

In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector.  Numerical simulations are performed using stylized Chinese data, and banks failures are generated through...