We develop a framework for modelling differences in liquidity across assets in order to examine the interactions between asset prices, liquidity premia and aggregate activity. In so doing, we want to find out what role government policy might have through open market operations that change the...

We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. Our goal is to explore the connection between the exchange rate regime and financial distress. We first show that a calibrated version of the model captures well the behavior of the...

We explore the implications of current account adjustment for monetary policy within a simple two-country DSGE model. Our framework nests Obstfeld and Rogoff’s (2005) static model of exchange rate responsiveness to current account reversals. It extends this approach by endogenizing the dynamic...

This paper surveys literature that explores the possible links between the financial system and aggregate economic behavior. The survey is in two parts: the first reviews the traditional work and the second discusses new research. Copyright 1988 by Ohio State University Press.

We develop and estimate a medium scale macroeconomic model that allows for unemployment and staggered nominal wage contracting. In contrast to most existing quantitative models, employment adjustment is on the extensive margin and the employment of existing workers is efficient. Wage rigidity,...