In this paper we examine linkages across non-energy commodity price developments by means of a factor-augmented VAR model (FAVAR). From a set of non-energy commodity price series, we extract two factors, which we identify as common trends in metals and a food prices. These factors are included...

We review the recent literature that studies new, detailed micro data on prices. We discuss implications of the new micro data for macro models. We argue that the new micro data are helpful for macro models, but not decisive. There is no simple mapping from the frequency of price changes in...

Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity...

We analyze the contribution of credit spread, house and stock price shocks to GDP growth in the US based on a Bayesian VAR with time-varying parameters estimated over 1958-2012. Our main findings are: (i) The contribution of financial shocks to GDP growth fluctuates from about 20 percent in...

We present an incomplete markets model to understand the costs and benefits of increasing government debt in a low interest rate environment. Higher risk increases the demand for safe assets, lowering the natural rate of interest below zero, constraining monetary policy at the zero lower bound,...

We estimate indicators of aggregate demand and supply conditions based on a structural factor model using a large number of inflation and real activity measures for the United States. We identify demand and supply factors by imposing theoretically motivated sign restrictions on factor loadings....

We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

In this paper, we discuss the consequences of imperfect information about financial frictions on the macroeconomy. We rely on a New Keynesian DSGE model with a banking sector in which we introduce imperfect information about a limited enforcement problem. Bank managers divert resources and can...

We show in a dynamic stochastic general equilibrium framework that the introduction of a common currency by a group of countries with only partially integrated goods markets, incomplete financial markets and no labor migration across member states, significantly increases volatility of...

This paper shows how the average maturity of corporate bonds can affect the transmission of shocks if financial frictions prevail. We modify a standard financial accelerator model à la Bernanke, Gertler, and Gilchrist (1999) and allow for market-based debt which has a market-determined price....