The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification mechanism to study the effects of macro-prudential policy. Financial innovation enhances the ability of...

government interventions in agricultural markets in order to stabilize commodity prices and producer incomes have had a long tradition. intervention has been at both the state and country levels and has been for the most part in the form of commodity-based schemes. this study represents an attempt to develop an appropriate methodology for analyzing the aggre-gate effects of a particular type of...

This paper studies why the micro-prudential regulations fails to maintain a stable financial system by investigating the impact of micro-prudential regulation on the systemic risk in a cross-sectional dimension. We construct a static model for risk-taking behavior of financial institutions and compare the systemic risks in two cases with and without a capital requirement regulation. In a system...