We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the "missing disinflation" during the Great Recession. We apply a vector autoregressive model to US data and identify financial shocks through sign restrictions. Our main finding is that...

We build a two-country version of the model in Gali & Monacelli (2005), which extends for a small open economy the new Keynesain DSGE model used as tool for monetary policy analysis in closed economies. A distinctive feature of the model is that the terms of trade enters directly into the new...

At the zero lower bound (ZLB), expectations about the future path of monetary or fiscal policy are crucial. We model expectations formation under level-k thinking, a form of bounded rationality introduced by García-Schmidt and Woodford (2019) and Farhi and Werning (2017), consistent with...

This paper proposes a tractable financial accelerator New Keynesian DSGE modelthat allows for closed-form solutions. In the presence of financial frictions, theNew Keynesian Phillips curve features a flat slope with respect to the output gapand is strongly forward-looking. All shocks cause...

After an expansionary monetary policy shock employment increases and unemployment falls. In standard New Keynesian models the fall in aggregate unemployment does not affect employed workers at all. However, Lüchinger, Meier and Stutzer (2010) found that the risk of unemployment negatively...

In this paper we set up a New-Keynesian model with a heterogenous banking sector to analyze liquidity problems on the interbank market. The presence of an interbank market is essential to consider a situation where an increased liquidity supply by the central bank is only partially passed on to...

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....