Typically, the friction is modeled as something that effectively changes the expected cash flows associated with financial intermediation, but not the net-of-default risk premium earned by investors. 8  BIS central bankers’ speeches  Rates,” Finance and Economics Discussion Series 2005–33. Washington: Board of Governors of the Federal Reserve System, August. Kocherlakota, Narayana (2013).
Somebody once said the following about the part of Europe I live in: “I do not find Northern Europe an ideal zone for human habitation. It is a fine place for industrial productivity, but its climate breeds puritans and the terrible dictates of the Protestant Work Ethic.