In this paper, we use an open economy DGE model (SIGMA) to assess the quantitative effects of fiscal shocks on the trade balance in the United States. We examine the effects of two alternative fiscal shocks: a rise in government consumption, and a reduction in the labor income tax rate. Our...

Over the past decade there has been remarkable progress in developing empirical micro-founded macroeconomic models for monetary policy analysis that feature coherence both to economic theory and to the data. In this paper, we estimate using Bayesian methods a second-generation micro founded...

We present an algorithm and software routines for computing nth-order approximate solutions to dynamic, discrete-time rational expectations models around a nonstochastic steady state. We apply these routines to investigate the optimal monetary policy with commitment in an optimizing-agent model...

We formulate a generalized price-setting framework that incorporates staggered contracts of multiple durations and that enables us to directly identify the influences of nominal vs. real rigidities. Using German macroeconomic data over the period 1975Q1 through 1998Q4 to estimate this framework,...

Literature on monetary policy can be broadly classified into two categories. The first category involves the construction of dynamic stochastic general-equilibrium models for monetary policy. The solid micro foundations built into these models are important because they facilitate interpretation...

We construct an empirical measure of market frictions in the corporate market based on the difference between the corporate bond spread and the credit default swap spread for a large number of firms in a new, large dataset that we construct. Under fairly standard assumptions, the two spreads...

We provide analytical and empirical underpinnings for the notion that the financial fragility of the aggregate economy depends on the balance sheet conditions of the corporate sector. First, we obtain time-varying semiparametric estimates of the relationship between the debt-equity ratio and the...