Elisabeth Huybens

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We evaluate the desirability of having an elastic currency generated by a lender of last resort that prints money and lends it to banks in distress. When banks cannot borrow, the economy has a unique equilibrium that is not Pareto optimal. The introduction of unlimited borrowing at a zero nominal interest rate generates a steady state equilibrium that is(More)
We test for the presence of market discipline in the banking sector in early 20 th century Mexico. Using a panel of financial data from note-issuing banks between 1905 and 1910, we examine whether bank fundamentals influenced the pattern of withdrawals. When we do not control for exit, our estimation suggests that fundamentals were not a significant(More)
All Rights Reserved This paper has not undergone the review accorded to official World Bank publications. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those(More)
We explore the role of domestic financial market frictions in explaining sharp movements in real and nominal exchange rates, capital flows, and output for a small open economy. Financial intermediaries arise endogenously to insulate depositors from the consequences of liquidity shocks and stochastic investment project returns, and to provide intermediation(More)
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