Uncertainty about the future course of the economy is a possible driver of aggregate fluctuations. To identify the different dimensions of uncertainty in the macroeconomy we construct a large dataset covering all types of economic uncertainty. We then identify two fundamental factors which...

The argument that policy risk, i.e., uncertainty about monetary and fiscal policy, has been holding back the economic recovery in the U.S. during the Great Recession has a large popular appeal. We analyze the role of policy risk in explaining business cycle fluctuations by using an estimated New...

This paper analyses the relations between the banking system fluctuations, on one hand, and taxation and public spending, on the other one, using a VECM methodology. We find some evidence of prociclicality of fiscal policy using variables such as government spending, taxes, and primary surplus....

In U.S. data 1981–2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is acyclical; similarly, shocks to unsecured firm credit explain a far larger fraction of output fluctuations than shocks to secured credit. In this paper we develop a tractable...

This paper explores the link between monetary policies of large industrial countries and international credit cycles. Based on an overinvestment framework, we show that in the prevailing asymmetric world monetary system, monetary policies of large centre countries can fuel credit booms in...

This paper develops a general-equilibrium model of skill-biased technological change that approximates the observed shifts in the shares of wage and non-wage income going to the top decile of U.S. households since 1980. Under realistic assumptions, we find that all agents can benefit from the...

We investigate the international linkages of inflation uncertainty in the G7. In a first step, we document that inflation uncertainty in the G7 is intertwined. Moreover, the degree of synchronization has increased during the recent two decades. Second, based on a Factor-Structural Vector...

The European sovereign debt crisis revived the discussion concerning the pros and cons of exchange rate adjustment in the face of asymmetric shocks. Exit from the euro area is to regain rapidly international competitiveness. Exchange rate stability with structural reforms could be beneficial for...

Empirical and institutional evidence finds considerable time variation in the degree of wage indexation to past inflation, a finding that is at odds with the assumption of constant indexation parameters in most New-Keynesian DSGE models. We build a DSGE model with endogenous wage indexation in...

This study develops a stylised DSGE model, that departs in one aspect: it replaces the general equilibrium approach by disequilibrium economics. In this way, richer macroeconomic adjustment dynamics result, as it is not necessary to assume that goods and labour markets continuously clear. The...