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Working Paper
Channel systems: Why is there a positive spread?
An increasing number of central banks implement monetary policy via two standing facilities: a lending facility and a deposit facility. In this paper we show that it is socially optimal to implement a non-zero interest rate spread. We prove this result in a dynamic general equilibrium model where market participants have heterogeneous liquidity needs and where the central bank requires government bonds as collateral. We also calibrate the model and discuss the behavior of the money market rate and the volumes traded at the ECB?s deposit and lending facilities in response to the recent ...
Working Paper
Introduction to the macroeconomic dynamics: special issues on money, credit, and liquidity
We motivate and provide an overview to New Monetarist Economics. We then briefly describe the individual contributions to the Macroeconomics Dynamics special issues on money, credit and liquidity.
Journal Article
Sovereign debt: a modern Greek tragedy
The authors of this article provide a general introduction to the concept of sovereign debt?including the seductive nature of borrowing and the strategies associated with default?before analyzing the current debt crises in Europe. They focus on Greece?s current woes but also discuss Portugal, Ireland, Italy, and Spain. The authors also discuss the environment in the United States, which has a high debt burden of its own, and present fiscal choices for policymakers and taxpayers.