In this paper we investigate the risk-related effects of monetary policy both in normal times, as well as in periods where the zero lower bound (ZLB) binds, in a stylized macroeconomic model with boundedly rational beliefs. In our model, financial market participants use heuristics to assess the...

We investigate the relationship between monetary policy and banks' risk-taking behavior. We study a general equilibrium model in which a risk averse bank credits firms and also manages a portfolio consisting of a risky and a risk-free asset. When a bank signs up credit contracts with firms, it...

In this paper we study the implementation of a state-dependent inflation target in a two-country monetary union model characterized by boundedly rational agents. In particular, we use the spread between the actual policy rate (which is constrained by the zero-lower-bound) and the Taylor rate...

Recent evidence on the development of corporate debt suggests that firms' leverage ratios increased enormously during the past few decades. Taking into account firms financing concerns, the present work provides a dynamic disequilibrium model that is able to generate cyclical patterns of various...

Against the background of the emergence of macroeconomic imbalances within the European Monetary Union (EMU), we investigate in this paper the macroeconomic consequences of cross-border banking in monetary unions such as the euro area. For this purpose, we incorporate in an otherwise standard...

The analysis of the financial cycle and its interaction with the macroeconomy has become a central issue for the design of macroprudential policy since the 2007-08 financial crisis. This paper proposes the construction of financial cycle measures for the US based on a large data set of...