This paper endeavours to illustrate the consequences of a credit squeeze by inserting a standard model of retail banks into some familiar macroeconomic models. Some possible policy conclusions are drawn about the benefits of incentives to increase lending at these times, and to reduce it in much...

This overview of transaction cost economics is organized around the "Carnegie Triple" – be disciplined; be interdisciplinary; have an active mind. The first of these urges those who would open up the black box of economic organization to do so in a modest, slow, molecular, definitive way, with...

We analyze the international transmission of financial stress and its effects on economic activity. We construct country specific monthly financial stress indexes (FSI) using dynamic factor models from 1970 until 2012 for 20 countries. We show that there is a strong co-movement of the FSI during...

In this paper we investigate the effects of uncertainty shocks on economic activity using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic...

Whereas microeconomic studies point to pronounced downward rigidity of nominal wages in the US economy, the standard Phillips curve neglects such a feature. Using a stochastic frontier model we find macroeconomic evidence of a strictly nonnegative error in an otherwise standard Phillips curve in...

Empirical data show that firms tend to improve their ranking in the productivity distribution over time. A sticky-price model with firm-level productivity growth fits this data and predicts that the optimal long-run inflation rate is positive and between 1.5% and 2% per year. In contrast, the...

Over the past two decades, technological progress in the United States has been biased towards skilled labor. What does this imply for business cycles? We construct a quarterly skill premium from the CPS and use it to identify skill-biased technology shocks in a VAR with long-run restrictions....

Many labor market models use both idiosyncratic productivity and a vacancy free entry condition. This paper shows that these two features combined generate an equilibrium comovement between matches on the one hand and unemployment and vacancies on the other hand, which is observationally...

Output gap estimates at the current edge are subject to severe revisions. This study analyzes whether monetary aggregates can be used to improve the reliability of early output gap estimates as proposed by several theoretical models. A real-time experiment shows that real M1 can improve output...

The slow recovery following the 2008/2009 recession has led to renewed interest in the question whether deep recessions lower real GDP permanently or whether we can expect a rebound to earlier trend levels. Using a recent quantile autoregression unit root test we check whether shocks to real GDP...