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Deposit insurance in general equilibrium
(2016)Economics Working Paper SeriesWe study the consequences and optimal design of bank deposit insurance in a general equilibrium model. The model involves two production sectors. One sector is financed by issuing bonds to risk–averse households. Firms in the other sector are monitored and financed by banks. Households fundbanks through deposits and equity. Deposits are explicitly insured by a deposit insurance fund. Any remaining shortfall is implicitly guaranteed by the ...Working Paper -
Banking with contingent contracts, macroeconomic risks, and banking crises
(2008)Economics Working Paper SeriesWorking Paper -
On banking regulation and lobbying
(2019)Economics Working Paper SeriesWe study the political economy of bank capital regulation from a positive and normative perspective. In a general equilibrium setting, capital requirements and lobbying contributions are determined as the outcome of bargaining between banks and politicians. We show that bankers and politicians agree on lobbying contributions and capital regulation that renders banks fragile, reducing efficiency and fairness. Consideration of all general ...Working Paper -
Economic rationales for investments in science
(2018)Economics Working Paper SeriesWorking Paper -
The Monetary Policy Haircut Rule
(2023)CEPR Discussion PapersWe embed a banking model, depicting the duality of private money creation and credit extension, into a two-sector neoclassical model with financial frictions. Banks rely on central-bank reserve loans that are collateralized according to the central bank's collateral framework. We derive optimal static and dynamic haircut rules, which balance the efficient allocation of capital across sectors and bank-default costs. We offer a simple formula ...Working Paper -
International emission permit markets with refunding
(2008)Economics Working Paper SeriesWorking Paper -
Default risk in stochastic volatility models
(2010)Economics Working Paper SeriesWe consider a stochastic volatility model of the mean-reverting type to describe theevolution of a firm’s values instead of the classical approach by Merton with geometricBrownian motions. We develop an analytical expression for the default probability. Oursimulation results indicate that the stochastic volatility model tends to predict higherdefault probabilities than the corresponding Merton model if a firm’s credit quality isnot too ...Working Paper -
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Basic research, openness, and convergence
(2010)Economics Working Paper SeriesWe study a model where economic growth is fueled by public basic-research investment and the importation of leading technology from foreign countries. In each period, the government chooses the amount of basic research, balancing the cost and benefits of stimulating growth through both channels. We establish the existence of steady states and the long-run share of technologically advanced sectors in the economy. Then, we explore how ...Working Paper