Standard models used for monetary policy analysis rely on sticky prices. Recently, the literature started to explore also nominal debt contracts. Focusing on mortgages, this paper compares the two channels of transmission within a common framework. The sticky price channel is dominant when...

Over the U.S. business cycle, fluctuations in residential investment are well known to systematically lead GDP. These dynamics are documented here to be specific to the U.S. and Canada. In other developed economies residential investment is broadly coincident with GDP. Nonresidential investment...

This paper investigates the quantitative importance of various types of distortions for inflation and nominal interest rate dynamics by extending business cycle accounting to monetary models. Representing various classes of real and nominal distortions as 'wedges' in standard equilibrium...

Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the...

A monetary aggregate consisting predominantly of zero-maturity deposits, called MZM, tends to systematically lead output in the US business cycle. Such fluctuations are observed both before and after the 1979 monetary policy change. Similar dynamics are obtained in a model with multi-stage...