Recent evidence on bond markets suggests that there are risk factors underlying changes in interest rate derivatives prices that are independent of those underlying shifts in the yield curve. The presence of unspanned factors seems puzzling because derivatives are based on the underlying...

The method of maximum likelihood is used to estimate a Dynamic Stochastic General Equilibrium business cycle model that combines elements of existing sticky-price and limited-participation specifications. Sticky prices are incorporated, following Rotemberg (1982), by assuming that...

We investigate whether monetary policy defined as an interest rate rule should respond to stock prices fluctuations under the following two criteria: 1) the rule must guarantee a unique equilibrium and 2) the MSV representation of this unique equilibrium must be learnable in the E-stability...

This paper embeds the financial accelerator into a medium-scale DSGE model and estimates it using Bayesian methods. Incorporation of financial frictions enhances the model's description of the main macroeconomic aggregates. The financial accelerator accounts for approximately ten percent of...

This paper examines the role of housing decisions on business cycles fluctuations. We use an overlapping generation model where to acquire a house whose services are an argument in the utility function households have to save for a down payment and make a long term financial committment. Because...

Using a sticky price-wage model with capital accumulation and adjustment costs, this paper analyses the welfare effects of non-fundamental asset price and investment fluctuations for the representative household. The welfare effect depends strongly on the steady state level around which the...

We extend a standard monetary quantitative model to provide a richer role for financial intermediaries and to generate greater persistence in the effects of monetary policy shocks. We first assume that existing clients of banks operate a diminishing returns to scale technology. Second, we assume...

When the Central Bank sets nominal rates as a a non-decreasing function of the inflation rate to stabilize the economy, that is it uses a Taylor Rule, the zero lower bound on interest rates may result in multiple equilibria and a liquidity trap. However, if fiscal policy is non-Ricardian, or...