During September 2008, soon after Lehman Brothers filed for Chapter 11 protection, the Reserve Primary Fund, a large and prominent money market mutual fund, “broke the buck”: it declared a net asset value that was less that the $1 per share that is standard for such funds as a result of marking down the value of Lehman debt in its portfolio. This event triggered a large number of redemptions fr...

Are securities markets more liquid when the economy is more liquid? If so, why? One possibility is that market depth depends on credit constrained intermediaries. This paper offers another explanation, which does not involve frictions or market segmentation. Measuring market illiquidity by the slope of the representative agent’s demand curve for a risky asset, I show that this slope is steeper ...

The accuracy of prediction markets has been documented both for markets based on real-money and those based on play-money. To test how much extra accuracy can be obtained by using real money versus play-money, we set up a real-world online experiment pitting the predictions of TradeSports.com (real-money) against those of NewsFutures.com (play-money) regarding American Football outcomes during ...

Financial statements of nineteen mature banks have been patronized to examine the impact of macroeconomic indicators and bank-specific determinants on the NPLs ratio through Quantile and Panel Data regression approaches. The impact of macroeconomic indicators on credit risk is statistically estimated for banking network via two directions. First, different quantiles are econometrically calculat...

This paper intends to discuss some problematic aspects that IS-LM have when dealing with fiscal deficits, especially when considering loanable funds model. Many others have focused on its assumptions for criticism of IS-LM, but I will mainly focus on its fundamental modelling nature. To say more specifically, I will argue that ordinary ISLM analysis is in contradictory nature to simultaneous eq...

Recent debates in monetary theory have centered on so-called free banking and the role of banks providing money form fiduciary media a pure market economy. This paper examines how to what extent can emerge Based value, it is argued that those economists are mistaken who claim substitutes must all cases be interpreted as being titles. Those too mistaken, however, large for circulation It holding...

How do financial frictions affect the optimal inflation rate? Can financial frictions alone annul the long-run super-neutrality of money? Should the inflation rate be higher in emerging market economies with less developed financial markets than in advanced economies, as is currently observed? To answer these questions we set up an incomplete markets model in which households choose portfolios ...

The purpose of this paper is to explore the implications of private money issue for the effects of monetary policy, for optimal policy, and for the role of fiat money. A locational model is constructed which gives an explicit account of the role for money and credit, and for limited financial market participation. When private money issue is prohibited, there is a liquidity effect as the result...