Unconventional fiscal policy uses announcements of future increases in consumption taxes to generate inflation expectations and accelerate consumption expenditure. It is budget neutral and time consistent. We provide preliminary evidence for the effectiveness of such policies using changes in...

This article analyzes the behavioral effects of unemployment benefits (UB) and it characterizes their optimal level when jobless people, who can carry out a subsistence activity, only survive if they have access to a minimum consumption level. Our model shows that if the level of UB is low...

We extend the canonical income process with persistent and transitory risk to shock distributions with left-skewness and excess kurtosis, to which we refer as higher-order risk. We estimate our extended income process by GMM for household data from the United States. We find countercyclical...

The Basel credit-to-GDP gap is the single most popular measure of excessive credit growth and the financial cycle in general. It is based, however, on a purely statistical understanding of excessiveness: Growth is excessive if the credit-to-GDP ratio (i.e. the ratio of credit to nominal GDP) is...

Current time allocation and household production models face three major weaknesses: First, they only describe the average time allocation. Thus, information about the order of activities is lost. Therefore, it is impossible to describe the influence of activities on later ones. Such...

How do labor market reforms affect international competitiveness and net foreign assets? To answer this question, we build a two-region RBC model with labor market frictions, idiosyncratic consumption risk, and limited cross-sectional heterogeneity to establish a direct link between labor market...

House-purchasing decisions and the possibility of existing homeowners to tap into their housing equity depend decisively on prevailing loan-to-value (LTV) ratios in mortgage markets with borrowing constrained households. Utilizing a smooth transition local projection (STLP) approach, I show that...

Motivated by the apparent failure of the credit multiplier mechanism (CM) to deliver amplification in DSGE models, we re-examine its role in business cycles to address the question: is something wrong with the CM? Our answer is no. In coming to this answer we construct a model with reproducible...

This paper employs a calibrated model of the US economy to analyze the boom and bust in house prices as well as the shifts in the distribution of wealth during the years around the Great Recession. We replicate the dynamics of the housing market using shocks to aggregate income, the distribution...

This paper studies the effect of two labor market institutions, unemployment insurance (UI) and job search assistance (JSA), on the output cost and welfare cost of recessions. The paper develops a tractable incomplete-market model with search unemployment, skill depreciation during unemployment,...