Related papers: Monetary Policy, Uncertainty, and Credit Supply
We model a network economy with three sectors: downstream firms, upstream firms, and banks. Agents are linked by productive and credit relationships so that the behavior of one agent influences the behavior of the others through network…
Based on an empirical analysis of the network structure of the Austrian inter-bank market, we study the flow of funds through the banking network following exogenous shocks to the system. These shocks are implemented by stochastic changes…
We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete…
This paper examines the impact of US monetary policy tightening on emerging markets, distinguishing between direct and indirect spillover effects using the global vector autoregression with stochastic volatility covering 32 countries. The…
I develop and estimate a dynamic equilibrium model of risky entrepreneurs' borrowing and savings decisions incorporating both formal and local-informal credit markets. Households have access to an exogenous formal credit market and to an…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…
When fitting a particular Economic model on a sample of data, the model may turn out to be heavily misspecified for some observations. This can happen because of unmodelled idiosyncratic events, such as an abrupt but short-lived change in…
This paper studies the propagation of finite-sample uncertainty under nonlinear transformations commonly used in statistical decision systems. In particular, we consider process capability indices, which are widely used in manufacturing…
We consider a model of financial contagion in a bipartite network of assets and banks recently introduced in the literature, and we study the effect of power law distributions of degree and balance-sheet size on the stability of the system.…
Understanding disaggregate channels in the transmission of monetary policy is of crucial importance for effectively implementing policy measures. We extend the empirical econometric literature on the role of production networks in the…
The existence of asymmetric information has always been a major concern for financial institutions. Financial intermediaries such as commercial banks need to study the quality of potential borrowers in order to make their decision on…
We study the equilibrium behavior in a multi-commodity selfish routing game with many types of uncertain users where each user over- or under-estimates their congestion costs by a multiplicative factor. Surprisingly, we find that…
Monetary inflation is a sustained increase in the money supply than can result in price inflation, which is a rise in the general level of prices of goods and services. The objectives of this paper were to develop economic models to (1)…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
The interconnectedness of financial institutions affects instability and credit crises. To quantify systemic risk we introduce here the PD model, a dynamic model that combines credit risk techniques with a contagion mechanism on the network…