Abstract not found

In 2007 all ECB publications feature a motif taken from the €20 banknote. This paper can be downloaded without charge from

This paper analyzes a model in which the risk associated with entrepreneurial activity implies that the amount of such activity is procyclical and results in amplification and intertemporal propagation of productivity shocks. In the model risk averse agents choose between a riskless project and a risky project with higher expected output (‘the entrepreneurial activity’). Agents who become entrepreneurs need to bear part of the project-specific risk for incentive reasons. More agents become entrepreneurs when productivity is high, because agents are more willing to bear risk and need to bear less risk for incentive reasons. Furthermore, cross-sectional heterogeneity can be countercyclical.

: In this paper, we introduce a dynamic general equilibrium model with numerous and heterogeneous investment projects and endogenous occupational choice to study a credit crunch. The investment decision is determined through the occupational choice of households which is driven by the endogenous accumulation of assets as they face various employment and return risks over a long lifetime. Consistent with empirical evidence, the origin of a credit crunch may be found in the conservative lending policies by banks during periods of financial duress and reduced profitability, but not informational problems as in the extant literature. Monetary policy is shown to be largely ineffective in alleviating the credit crunch, while flexible loan regulation can erase it. Keywords: Credit crunch, Basle accord, heterogeneous agents, bank regulation JEL classification: E44, E22, G28, E58 1 Introduction and Motivation According to the empirical literature, from 1990 through 1992, Canada, the Unite...

A variety of empirical and theoretical evidence published in recent years suggests that frictions in credit markets are crucial to understand the monetary transmission mechanism. The objective of this paper is to provide a quantitative evaluation of the “credit view”-interpretation of this evidence. Special attention is paid to the role of borrowers’ net worth. A model with endogenous agency costs is developed where a debt contracting problem with asymmetric information between lender and borrower is embedded in a stochastic dynamic general equilibrium model with money. The model incorporates a cash-in-advance constraint and a limited participation assumption in order to induce a liquidity effect of monetary shocks and to propagate monetary disturbances. The paper has two principal conclusions: First, the model economy shows that a positive money supply shock generates an increase in output and in employment. Second, ex ante heterogeneity of borrowers has a significant influence on the reactions of the model economy to a monetary shock.

This paper analyzes a model in which incentive constrained contracting implies both ampli#cation and intertemporal propagation of technology shocks. In the model risk averse agents choose between a riskless technology and a risky technology with higher expected return but also with moral hazard. Under the assumption of decreasing absolute risk aversion and intratemporal incentive provision agents' technology choices are procyclical and amplify technology shocks. When intertemporal smoothing through storage is possible the technology choices can be correlated across time even if technology shocks are independent. The propagation is asymmetric and results in long expansions and short recessions. # This paper is a revised version of the second chapter of my thesis at the Universityof Chicago. I thank Marco Bassetto, Andrea Eisfeldt, Lars Hansen, Alexander Monge, Lars Stole, Robert Townsend, seminar participants at the University of Chicago and especially Thomas Sargent and Jo...

The world banking industry is undergoing a large-scale transformation. Banking systems and financial markets, both domestic and international, have been undergoing a series of profound changes. One of the main driving forces of these worldwide changes is the introduction of innovations in new information technologies. Against these trends, industrial structure in the banking industry and banking regulation have sometimes encouraged these trends and sometimes adapted to them. The aim of this paper is to present research findings and the main arguments in the literature on technological change and industrial organisation in the banking industry. The last section of the paper focuses on the role of information technologies in the banking industry. We present research findings of functional studies on IT investment in the banking industry. These studies have analysed the relationship between IT and corporate performance by examining specific IT applications in the context of corporate strategies.

Abstract not found

The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve Bank of San Francisco or the

This paper is an extension of our previous work (Morozumi 2008). The purpose of the study is again to see how output dynamics of the response to money shocks is altered once credit frictions are incorporated into a dynamic general equilibrium model with staggered pricesetting. However, we now relax the assumption of economy-wide input markets to study the output dynamics in a model with segmented input markets, which seems to be a more plausible assumption especially in the short run. First, we show that the effect of credit frictions is robust to the different ways of modelling input markets. Qualitatively, credit frictions still amplify the impact e¤ect of money shocks while reducing the persistence of the shocks. Quantitatively, it is still the case that the effect on the impact can be significant, while the effect on persistence is rather small. As a second result, we show that for a given level of credit frictions, both the impact on output of money shocks and the persistence of the effect are much greater in a model with segmented input markets.