This paper compares the depth of the Recent Crisis and the Great Depression. We use a new data set to compare the drop in activity in the industrialized countries for seven activity indicators. This is done under the assumption that the Recent Crisis leveled off in mid-2009 for production and...

The provision of credit has been shown to be eminent for macroeconomic activity.Recent research highlighted that optimism may play a role in the provision of credit through leverage cycles. A decomposition of corporate bond spreads allows the modelling of a propensity-to-lend through an excess...

This paper studies the effects of credit supply disruptions in a dynamic stochastic general equilibrium (DSGE) framework. First, this paper examines the effects of credit supply disruptions in the business sector. The model with financially constrained households generates a bigger decline in...

During the ongoing financial crisis the analysis of similar historical crises has gained more and more attention among economic researchers and forecasters. Existing studies, however, do not tackle the immense heterogeneity that is present in cross-country samples in a formal and consistent way....

This paper elaborates on the relative importance of sectoral shocks for real economic activity in Germany. Implications of multisectoral real business cycle models are examined by resorting to testing techniques based on stock market returns. The empirical evidence is obtained by calculating...

We analyze the interaction of stock market movements and politics in Germany. In contrast to the empirical evidence available for the U.S., we do not find that German stock market returns tend to be higher during liberal than during conservative governments. Also in contrast to results for the...

In this paper, we show that strategic complementarities–such as firm-specific factors or quasikinked demand–have crucial implications for the design of monetary policy and for the welfare costs of output and inflation variability. Recent research has mainly used log-linear approximations to...

This paper compares the welfare effects of anticipated and unanticipated cost-push shocks within the canonical New Keynesian model with optimal monetary policy. We find that, for empirically plausible degrees of nominal rigidity, the anticipation of a future cost-push shock leads to a higher...

We investigate whether recoveries following normal recessions differ from recoveries following recessions that are associated with either banking crises or housing crises. Using a parametric panel framework that allows for a bounce-back in the level of output during the recovery, we find that...

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....