We study the effects of financial uncertainty on investment dynamics in the U.S. using a vector autoregression with drifting parameters and stochastic volatilities. We find time-varying negative effects of financial uncertainty shocks on investment. These effects have declined in the post-WWII...

We estimate a time-varying parameter VAR (TVP-VAR) with stochastic volatility using post- WWII U.S. data to study the effects of uncertainty shocks on inflation. We find the response of inflation to be statistically insignificant until mid-to-late 1990s and negative thereafter. Our findings...

This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these...

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

We investigate a new source of economic stickiness: namely, staggered loan interest rate contracts under monopolistic competition. The paper introduces this mechanism into a standard New Keynesian model. Simulations show that a response to a financial shock is greatly amplified by the staggered...

We explore the historical relationship between financial conditions and real economic growth for quarterly U.S. data from 1875 to 2017 with a flexible empirical copula modelling methodology. We compare specifications with both linear and non-linear dependence, and with both Gaussian and...

We use a newly constructed narrative measure of regulatory bank capital requirement tightening events (Eickmeier et al., 2018) to examine their effects on household income and expenditure inequality in the US. Income and expenditure inequality both decline (the latter decline being slightly less...

Bank capital regulations are intended to enhance financial stability in the long run, but may, in the meanwhile, involve costs for the real economy. To examine these costs we propose a narrative index of aggregate tightenings in regulatory US bank capital requirements from 1979 to 2008....

We document that expansionary monetary policy shocks are less effective at stimulating output and investment in periods of high volatility compared to periods of low volatility, using a regime-switching vector autoregression. Exogenous policy changes are identified by adapting an external...

This paper uses a threshold-augmented Global VAR model to quantify the macroeconomic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the...