This paper studies the role of credit market development in an economy with credit frictions. I examine how the provision of credit in connection with collateral assets affects economic performance and the business cycle. In the framework of an economy in which credit constraints arise because...

We construct a state space model for measuring real economic activity in real time (e.g., minute by minute) using a variety of stock and flow data, observed at mixed frequencies. Our data set comprises macroeconomic and financial variables: GDP, IP, unemployment, stock and bond market data, and...

On the one hand, recently a number of theoretical models have highlighted the role of credit market frictions in propagating and amplifying macroeconomic shocks. On the other hand, it still seems an open question whether this role is quantitatively significant. Our paper tries to fill this gap....

We argue that the fiscal policies adopted early in World War I by the U.K. were responsible for its poor economic performance during the interwar period. In September 1915, the U.K. embarked on a set of non-tax-smoothing policies collectively known as the McKenna rule. The key dictum of the...

We use a dynamic general equilibrium model of the world economy to assess the economic implications of higher vulnerability from extreme meteorological events. In particular, we consider the impact of climate change on ENSO/NAO cycles, and the implied variation on regional expected damages, due...

Recent policy proposals call for setting up a benchmark indexed bond market to prevent "Sudden Stops". This paper analyzes the macroeconomic implications of these bonds using a general equilibrium model of a small open economy with financial frictions. In the absence of indexed bonds, negative...

Scientists and epistemologists agree that a scientific law must be relatively simple and not contradicted by the available evidence. We propose and test one such law pertaining to international economics, the triple-parity law. It integrates three well-known equilibrium conditions, which are...

Many have questioned the empirical relevance of the Calvo-Yun model. This paper appends three widely-studied macroeconomic models (Calvo-Yun, Hybrid and Svensson) with forward rate curves. We back out from observations on the yield curve the underlying macroeconomic model that most closely...

The Fed closely monitors the stock market and the stock market continuously forms expectations about the Fed decisions. What does this imply for the relation between the fed funds rate and the S&P500? We find that the answer depends on the conditions prevailing on the financial market. During...