This paper examines the conduct of monetary policy in the presence of credit and asset booms and busts. Conventional wisdom is for the central bank to respond to asset prices and other financial indicators insofar as these factors affect the forecasts of inflation. This paper finds that such...

Abstract Starting from some of the most recent literature developed after the world financial crisis, it has been developed a model with heterogeneous agents and an active interbank market, characterized by an endogenous default probability. The key feature of the analysis is that the...

In this paper I propose a medium scale Dynamic Stochastic General Equilibrium model for emphasizing the effects of the new Basel III Agreement for Romania’s financial stability. This model has similar structures as those developed by Walque et al. (2010) and Roger and Vlček (2011) but,...

We estimate a two-sector DSGEmodel with financial intermediaries—a-la Gertler and Karadi (2011) and Gertler and Kiyotaki (2010)—and quantify the importance of news shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market news...