Wallace attempts to analyse central bank interest rate control in a cashless, ArrowDebreu economy. The model incorporates only the unit of account function of money and exhibits a version of the classical dichotomy in which arbitrary accounting prices are independent of the equilibrium real relative price vector. A model with these properties is incapable of providing a theory of the price leve...

We provide a model of the impact of bank mergers on loan competition, individual reserve management and aggregate liquidity risk. Banks hold reserves against liquidity shocks, refinance in the interbank market and compete in a differentiated loan market. A merger creates an internal money market that induces financial cost advantages and may increase reserve holdings. We assess the liquidity ri...

We analyze the impact of news (information shocks) in economies where liquidity plays a role. While we also consider news about real factors, like productivity, one motivation is that central bank announcements evidently affect markets, as taken for granted by advocates of forward guidance policy. The dynamic effects can be complicated, with information about monetary policy or real factors aff...

This paper identifies the entrepreneur’s exposure to idiosyncratic risk as an important determinant of the demand for loans and the capital structure. The analysis is based on a sample of small and medium-sized private companies from the United States. The exposure to idiosyncratic risk is approximated by the share of personal net worth invested in one company (SNWI). Exposure to idiosyncratic ...

In this paper, we use a structural general-equilibrium approach to study whether the expenditureswitching role of exchange rates has changed in the G7 countries in the current episode of significant global imbalances. We develop a multi-sector two-country model for the United States and the G6 countries with the rest of the world captured by exogenous price and demand shocks, and estimate the m...

Burkart and Ellingsen’s (2004) model of trade credit and bank credit rationing predicts that trade credit will be used by medium-wealth and low-wealth firms to help ease bank credit rationing. The author tests these and other predictions of Burkart and Ellingsen’s model using a large sample of more than 28,000 Canadian firms. She uses an endogenous method to divide the firms into the appropriat...

The global International Financial Institutions (IFI’s) increasingly justify their operations in terms of the provision of International Public Goods (IPG’s). This is partly because there appears to be support among the rich countries of the North for expenditures on these IPG’s, in contrast to the “aid fatigue” that afflicts the channeling of country specific assistance. But do the IFI’s neces...

Are market-based or bank-based financial systems better at financing the expansion of industries that depend heavily on external finance? Are marketor bank-based financial systems better at facilitating the formation of new firms? We find evidence for neither the market-based nor the bank-based hypothesis. We find overwhelming evidence that industries that are heavily dependent on external fina...

We provide direct evidence regarding the risk and reputational capital implications of commercial bank securities underwriting activities. Using a large sample of commercial bank underwritten initial public offerings (IPOs) and comparisons with investment bank underwritten issues, we find that (1) commercial banks are no more likely to misprice IPOs than are traditional investment banks, and (2...

We use a randomized controlled trial to demonstrate that inexperienced female microenterprise owners in a Kenyan slum benefit from mentorship by an experienced entrepreneur in the same community. Using seven rounds of surveys, we find that mentorship increased profits by 20% relative to control. We conduct a formal business education intervention, which has no effect on profits despite changes ...