This essay argues that the Achilles heel of the international monetary and financial system is that it amplifies the “excess financial elasticity” of domestic policy regimes, ie it exacerbates their inability to prevent the build-up of financial imbalances, or outsize financial cycles, that...

In analysing the performance of the international monetary and financial system (IMFS), too much attention has been paid to the current account and far too little to the capital account. This is true of both formal analytical models and historical narratives. This approach may be reasonable when...

In this paper we explore the role of financial intermediation malfunction in macroeconomic fluctuations in Japan. To this end we estimate, using Japanese data, a financial accelerator model in which the balance sheet conditions of entrepreneurs in a goods-producing sector and those of a...

Studies that estimate the Phillips curve for the U.S. use mainly national-level data and find mixed evidence of nonlinearity, with some recent studies either rejecting nonlinearity or estimating only modest convexity. In addition, most studies do not make a distinction between the relative...

I study optimal interest rate policy in a small open economy with consumer search in the product market. When there are search frictions, firms price-to-market, with implications for the design of monetary policy. Country-specific shocks generate deviations from the law of one price for traded...

We study the joint dynamics of foreign capital flows and real activity during the recent boom- bust cycle of the Spanish economy, using a three-country New Keynesian model with credit- constrained households and firms, a construction sector and a government. We estimate the model using...

We present new evidence on how heterogeneity in banks interacts with monetary policy changes to impact bank lending, at both the bank and U.S. state levels. Using an exogenous policy measure identified from narratives on FOMC intentions and real-time economic forecasts, we find much stronger...

This paper analyzes how risk and other factors altered the relative use of short-term business debt funded by the shadow banking system since the early 1960s. Results indicate that the share was affected over the long-run not only by changing information and reserve requirement costs, but also...

This paper provides a set of stylized facts on the mechanisms through which banking and sovereign distress feed into each other, using a large sample of emerging economies over three decades. We first define “twin crises” as events where banking crises and sovereign defaults combine, and...