In responding to the extremely weak global economy after the financial crisis in 2008, many industrial nations have been considering or have already implemented negative nominal interest rate policy. This situation raises two important questions for monetary theories: (i) Given the widely held...

"This paper investigates the behavior of short-term real and nominal rates of interest by combining consumption-based and production-based models into a single general equilibrium framework. Based on the theoretical nonlinear relationships that link interest rates to both the marginal rates of...

"When monetary policies are endogenous, the conventional VAR approach for detecting the effect of monetary policies is powerless. This paper proposes to test the implication of monetary policies along a different dimension. That implication is to exploit the policy induced exogeneity of...

This paper stresses a new channel through which global financial linkages contribute to the co-movement in economic activity across countries. We show in a two-country setting with borrowing constraints that international credit markets are subject to self-fulfilling variations in the world real...