Using matched microdata for the UK, I estimate two distinct channels via which credit supply shocks affect mortgage debt: one that operates through price conditions in credit markets; and another that operates through non-price credit conditions and affects the quantity of credit supplied by...

This paper studies the effect of asset bubbles on economic growth in the presence of financial constraints and heterogeneous projects. I consider an economy with two sectors which differ in their productivity and the pledgeability of their output in financial markets. The first sector has low...

This paper studies the impact of credit sector reforms in a general equilibrium framework where heterogeneous firms choose their optimal investment and how to finance it. Besides retained earnings and bank loans, I focus on the crucial role played by alternative sources of funding, including...

The UK economy has experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the European Union. This paper develops and estimates a small open economy model with tradable and non-tradable sectors to characterise these adjustments. We demonstrate that...

This paper develops a tractable capitalist-worker New Keynesian model to study the interaction of fiscal policy and household heterogeneity. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model...

We study how small open economies can escape from deflation and unemployment in a situation where the world economy is permanently depressed. Building on the framework of Eggertsson et al (2016), we show that the transition to full employment and at-target inflation requires real and nominal...

Recent results suggesting that monetary financing is more expansionary than bond financing in standard New Keynesian models rely on a duality between policy rules for the rate of money growth and the short-term bond rate, rather than a special role for money. We incorporate two features into a...

Does fiscal policy have large and qualitatively different effects on the economy when the nominal interest rate is zero? An emerging consensus in the New Keynesian (NK) literature is that the answer to this question is yes. Evidence presented here suggests that the NK model's implications for...

Using a long span of expenditure survey data and a new narrative measure of exogenous income tax changes for the United Kingdom, we show that households with mortgage debt exhibit large and persistent consumption responses to changes in their income. Homeowners without a mortgage, in contrast,...

This paper studies optimal time‑consistent monetary policy in a simple New Keynesian model with long‑term nominal government debt. Fiscal policy is ‘active’, so that stabilisation of the government debt stock is a binding constraint on monetary policy. Away from the lower bound on the...