In this paper we study how credit shocks, that is, shocks affecting the ability to raise external funds for borrowers, affect macroeconomic fluctuations. A positive credit shock leads to a typical macroeconomic boom, with an expansion in consumption, investment, labor, output and productivity....

Interest rate swaps are among the most popular derivative contracts. With an interest rate swap, fixed interest payments are exchanged for payments linked to a floating rate. In this paper we develop a dynamic stochastic general equilibrium model to study corporate debt financing and the use of...

We examine the effects of long-lived nominal debt contracts in a quantitative business cycle model with financial frictions. In our setting, as in reality, firms fund themselves with a mix of nominal defaultable debt and equity securities to issue in every period. Debt is priced fairly taking...

analysis shows that innovations that have allowed firms to issue equity more flexibly can plausibly account for the lower output volatility together with the higher volatility in the financial structure of firms.

With over 300 stores in 40 countries, IKEA is a major international presence in retail housewares and furnishings. IKEA publishes country-specific catalogs with local-currency prices guaranteed to hold for 1 year. This paper explores a new dataset of IKEA products and catalog prices covering six...

How should policy be optimally designed when a monetary authority faces a private sector that is somewhat skeptical about policy announcements and which interprets economic data as providing evidence about the monetary authority's preferences or its ability to carry through on policy plans? To...

The model's flexibility also allows us to parameterize it in ways that generate behavior consistent with some recent studies in the literature, namely Midrigan (2006) and Golosov and Lucas (2008). We can also use simple versions of the model to understand the relationships between price...