This paper develops a dynamic general equilibrium model that is intended to help clarify the role of credit market frictions in business fluctuations, from both a qualitative and a quantitative standpoint. The model is a synthesis of the leading approaches in the literature. In particular, the...

Credit booms sometimes lead to financial crises which are accompanied with severe and persistent economic slumps. Does this imply that monetary policy should "lean against the wind" and counteract excess credit growth, even at the cost of higher output and inflation volatility? We study this...

This paper explores several issues concerning a possible zero lower bound (ZLB) including its theoretical rationale; the magnitude of effects of low sustained inflation on real interest rates; the validity of analyzing monetary policy in models with no monetary variables; and the dynamic...

This paper uses a novel teat to see whether the Herse (1985) and Woo (1985) models are consistent with the variability of the deutschemark - dollar exchange rate 1974-1984. The answer, perhaps surprisingly, is yes. Both models, however, explain the month to month variability as resulting in a...

A model of interest rate movements in response to new information on the money stock is developed.The model, which incorporates several earlier approaches as special cases, makes explicit the manner in which estimated interest rate responses to money surprises depend on the relative variances of...

In a recent paper, Canzoneri, Henderson, and Rogoff have shown that it is possible for the monetary authority to peg the nominal interest rate without creating price level indeterminacy in a simplified version of the 1975 Sargent-Wallace model. The present paper begins by reviewing that result,...

In October 1979 the Federal Reserve shifted from an interest rate oriented operating procedure to a reserves oriented procedure. It is argued in this paper that part of the very large increase in interest rate volatility which resulted from the policy switch may have been due to shifts in the...

This paper conducts a theoretical comparison of the potential effectiveness, in terms of money stock controllability, of interest rate and reserve instruments. Whereas previous studies have been basically static, the present analysis is carried out in the context of a dynamic macroeconomic model...

The maturity structure of the U.S. government's outstanding debt has undergone large changes over time, at least in part because of shifts in the Treasury's debt management policy. During most of the post World War I1 period, an emphasis on short-term issues rapidly reduced the debt's average...

This paper investigates the hypothesis that surprise changes in the money supply and anticipated inflation (the Mundell-Tobin effect) are both inversely related to the expected real interest rate. The two novel aspects of the investigation are tests of the hypothesized impact of money surprises...