This paper uses a dynamic stochastic general equilibrium model with credit market imperfections to estimate the role of credit market shocks and monetary policy in US business cycles. The estimated model captures much of the historical narrative regarding the conduct of monetary policy and...

Recent evidence by Bils and Klenow (2004) and Klenow and Kryvstov (2003) shows that the average price duration for US CPI-basket goods is in the order of one to two quarters, challenging the monetary business cycle research to try and explain how short price durations can nevertheless generate a...