We decompose aggregate consumption by modelling both savers and their links to collateral constrained borrowers through a bank which prices credit risk. Savers own both firms and the commercial bank while borrowers require loans from the commercial bank to effect their consumption plans. The...

Prior to the financial crisis mainstream monetary policy practice had become disconnected from money. We outline the basic rationale for this development using a simple model of money and credit in which we explore the conditions under which money matters directly for the conduct of policy....

Global real interest rates were driven up in the 1980s, partly to encourage disinflation, while subsequently structural and conjunctural factors have driven rates to lower levels. The increase in the global pool of savings and the fiscal correction associated with the long economic expansion...

The financial crisis and its aftermath has stimulated a vigorous debate on the use of macro-prudential instruments for both regulating the banking system and for providing additional tools for monetary policy makers. The widespread adoption of non-conventional monetary policies has provided some...

Using the business cycle accounting (BCA) framework pioneered by Chari, Kehoe and McGratten (2006) we examine the 2008-09 recession in the UK. There has been much commentary on the financial causes of this recession, which we might have expected to shock the equation governing the intertemporal...

We re-connect money to inflation using Goodfriend and McCallum’s (2007) model where banks supply loans to cash-in-advance constrained consumers on the basis of the value of collateral provided and the monitoring skills of banks. We show that when shocks to monitoring and collateral dominate...

We assess recent developments in monetary policy practice following the financial crisis drawing on papers from a specially convened conference in March 2010. In particular, we consider why central banks throughout the world have injected substantial quantities of liquidity into the financial...

The financial crisis has led to the development of an active debate on the use of macro-prudential instruments for regulating the banking system, in particular for liquidity and capital holdings. Within the context of a micro-founded macroeconomic model, we allow commercial banks to choose their...

At the zero lower bound, the scale and scope of non-conventional monetary policies have become the key decision variables for monetary policy makers. In the UK, quantitative easing has involved the creation of a fund to purchase medium term dated government bonds with borrowed central bank...

This paper studies the empirical relationship between the Federal funds effective rate and the rate of profit or profit-to-capital ratio in the U.S. economy. The linkages between these two variables are studied: 1) at business-cycle frequencies using various filters and employing...