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Preface; Contents; Monetary Policy, Financial Crises, and the Macroeconomy:Introduction; 1 Liquidity and Contagion of Financial Crises; 2 Putting Theory to Work; 3 Re-conceptualizing Macroeconomics; References; Part I Liquidity From a Macroeconomic Perspective; Balancing Lender of Last Resort Assistance with Avoidance of Moral Hazard; 1 Introduction; 2 The Meaning of Solvency?; 3 A Liquidity Problem Is a Solvency Problem; 4 Lend to the Market, not to an Individual Borrower?; 5 Limiting Moral Hazard; 5.1 Treat First Worst; 5.2 Involve the Other Banks, if Possible
5.3 Change the Incentive Structure6 Conclusions; References; Optimal Lender of Last Resort Policy in DifferentFinancial Systems; 1 Introduction; 1.1 Related Literature; 2 The Framework; 2.1 The Setup; 2.2 Financial Structure of Firms and Banks; 2.3 Local Lending Markets and the Time Structure of the Model; 3 Stability of an Individual Bank; 4 Equilibrium in the Liquidity Market; 5 Optimal LOLR-Policy; 6 Conclusions; References; Network Effects and Systemic Risk in the Banking Sector; 1 Introduction; 2 The Structure and Development of Credit Relationships in the Banking Sector
2.1 Extracting the ``Stylized Facts''2.2 Fitting Structural Models: Scale-Free and Core-Periphery Models for the Banking Network; 2.3 Fitting Behavioral Models: An Actor-Based Approach to Link Formation; 3 New Structural and Behavioral Models; 3.1 An Interbank Network Model Based on ``Stylized Facts''; 3.2 Interaction Between the Topology of Bank-Firm Loans and the Interbank Network; 3.3 A Dynamic Model of Link Formation in the Banking Sector; 4 Conclusion; References; Contagion Risk During the Euro Area Sovereign Debt Crisis: Greece, Convertibility Risk, and the ECB as Lender of Last Resort
1 The Greek Debt Crisis, Break-up Risk of the Euro Area, and the Lender of Last Resort Function of the Central Bank: Did Contagion Matter?2 Overview; 2.1 Definitions of Contagion; 2.2 Contagion in the Literature; 3 Correlation Based Contagion Analysis; 3.1 The DCC Model; 3.2 Dataset: Yield Data; 3.3 Principal Component Analysis: Accounting for a Global Common Factor; 4 Results: Different Phases of the Greek Crisis in Light of the DCC-Results; 4.1 Beginning of the Crisis in Autumn 2009; 4.2 The Crisis Intensifies in 2010; 4.3 Ongoing Crisis in 2011
4.4 The Climax and Mario Draghi's "Whatever it takes" Speech5 Effects of Greek Rating Downgrades on Correlations: Is There a Role for Non-fundamentally Driven Contagion?; 5.1 Regression Model Setup; 5.2 Ratings Data; 5.3 Rating Regression Results; 6 Conclusion; Appendix 1: Descriptive Statistics of Bond Yield Data; Appendix 2: Principal Component Analysis; Appendix 3: DCC Coefficients; Appendix 4: Country Ratings; Appendix 5: Results of Ratings Regression Equation (5) for Control Ratings; References; The Case for the Separation of Money and Credit; 1 Introduction
5.3 Change the Incentive Structure6 Conclusions; References; Optimal Lender of Last Resort Policy in DifferentFinancial Systems; 1 Introduction; 1.1 Related Literature; 2 The Framework; 2.1 The Setup; 2.2 Financial Structure of Firms and Banks; 2.3 Local Lending Markets and the Time Structure of the Model; 3 Stability of an Individual Bank; 4 Equilibrium in the Liquidity Market; 5 Optimal LOLR-Policy; 6 Conclusions; References; Network Effects and Systemic Risk in the Banking Sector; 1 Introduction; 2 The Structure and Development of Credit Relationships in the Banking Sector
2.1 Extracting the ``Stylized Facts''2.2 Fitting Structural Models: Scale-Free and Core-Periphery Models for the Banking Network; 2.3 Fitting Behavioral Models: An Actor-Based Approach to Link Formation; 3 New Structural and Behavioral Models; 3.1 An Interbank Network Model Based on ``Stylized Facts''; 3.2 Interaction Between the Topology of Bank-Firm Loans and the Interbank Network; 3.3 A Dynamic Model of Link Formation in the Banking Sector; 4 Conclusion; References; Contagion Risk During the Euro Area Sovereign Debt Crisis: Greece, Convertibility Risk, and the ECB as Lender of Last Resort
1 The Greek Debt Crisis, Break-up Risk of the Euro Area, and the Lender of Last Resort Function of the Central Bank: Did Contagion Matter?2 Overview; 2.1 Definitions of Contagion; 2.2 Contagion in the Literature; 3 Correlation Based Contagion Analysis; 3.1 The DCC Model; 3.2 Dataset: Yield Data; 3.3 Principal Component Analysis: Accounting for a Global Common Factor; 4 Results: Different Phases of the Greek Crisis in Light of the DCC-Results; 4.1 Beginning of the Crisis in Autumn 2009; 4.2 The Crisis Intensifies in 2010; 4.3 Ongoing Crisis in 2011
4.4 The Climax and Mario Draghi's "Whatever it takes" Speech5 Effects of Greek Rating Downgrades on Correlations: Is There a Role for Non-fundamentally Driven Contagion?; 5.1 Regression Model Setup; 5.2 Ratings Data; 5.3 Rating Regression Results; 6 Conclusion; Appendix 1: Descriptive Statistics of Bond Yield Data; Appendix 2: Principal Component Analysis; Appendix 3: DCC Coefficients; Appendix 4: Country Ratings; Appendix 5: Results of Ratings Regression Equation (5) for Control Ratings; References; The Case for the Separation of Money and Credit; 1 Introduction