This paper develops a model of a small open economy integrated in a monetary union. The model incorporates the standard nominal and real frictions in the literature. The parameters of the model are calibrated to the Portuguese data and the effects of the standard monetary policy shock are studied.

We study the macroeconomic effects of bank runs in a neoclassical growth model with a fully microfounded banking system. In every period, the banks provide insurance against idiosyncratic liquidity shocks, but the possibility of sunspot-driven bank runs distorts the equilibrium allocation. In...

The goal of this paper is to analyze predictability of future asset returns in the context of modeluncertainty. Using data for the Euro Area, the US and the U.K., we show that one can improve the forecasts of stock returns using a Bayesian Model Averaging (BMA) approach, and there is a large...

The responsiveness of long-term household debt to the interest rate is a crucial parameter for assessing the effectiveness of public policies aimed at promoting specific types of saving. This paper estimates the effect of a reform of Credito Bonificado, a large program in Portugal that...

In this paper we argue that, for a group of converging economies of the European Union, participation in the euro area has been associated with easier access to financing by domestic economic agents. Easier access to financing was a significant impulse leading to a sharp increase in households'...

How important are collateral constraints for the propagation and amplification of shocks? To address this question, we analyze a stochastic general equilibrium version of the model by Kiyotaki and Moore (JPE, 1997) in which all agents face concave production and utility functions and are...

What are the macroeconomic implications of higher leveraged borrowing? To address this question, we develop a business cycle model with credit frictions in which firms reallocate capital among themselves through the credit market. We find that looser collateral requirements moderate the...

We explore a new approach for nowcasting the output gap based on singular spectrum analysis. Resorting to real-time vintages, a recursive exercise is conducted so to assess the real-time reliability of our approach for nowcasting the US output gap, in comparison with some well-known benchmark...

This paper quantifies the role of expectation-driven cycles for housing market fluctuations in the United States. We find that news shocks: (1) account for a sizable fraction of the variability in house prices and other macroeconomic variables over the business cycle and (2) significantly...

We take to the data an RBC model with two salient features. First, we allow government consumption to directly affect the marginal utility of consumption. Second, we allow public capital to affect the productivity of private factors. On the one hand, private and government consumption are...