This paper evaluates the role of trade and financial linkages in the decision to enter a monetary union. We estimate a two-country DSGE model for the U.K. economy and the euro area, and use the model to compute the welfare trade-offs from joining the euro. We evaluate two alternative scenarios....

We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some...

In this paper, we study the optimal mix of monetary and macroprudential policies in an estimated two-country model of the euro area. The model includes real, nominal and financial frictions, and hence both monetary and macroprudential policy can play a role. We find that the introduction of a...

As central banks across the globe have responded to the COVID-19 shock by rounds of extensive monetary loosening, concerns about their inequality impact have grown. But rising inequality has multiple causes and its relationship with monetary policy is complex. This paper highlights the channels...

While there is growing evidence of persistent or even permanent output losses from financial crises, the causes remain unclear. One candidate is intangible capital - a rising driver of economic growth that, being non-pledgeable as collateral, is vulnerable to financial frictions. By sheltering...

This paper studies the impact of product and labor market reforms when the economy faces major slack and a binding constraint on monetary policy easing. such as the zero lower bound. To this end, we build a two-country model with endogenous producer entry, labor market frictions, and nominal...

This paper evaluates the strength of the balance sheet channel in the U.S. monetary policy transmission mechanism over the past three decades. Using a Factor-Augmented Vector Autoregression model on an expanded data set, including sectoral balance sheet variables, we show that the balance sheets...

We show that firms' market power dampens the response of their output to monetary policy shocks, using firm-level data for the United States and a large cross-country firm-level dataset for 14 advanced economies. The estimated impact of a firm's markup on its response to a monetary policy shock...