We explore the possibility that a housing market boombust cycle may arise when public beliefs are driven by news shocks. News, imperfect and noisy by nature, may generate expectations that are overly optimistic or pessimistic. Overoptimism easily leads to excessive accumulation of housing assets...

Firms in emerging markets are exposed to severe financial frictions and credit constraints that are exacerbated by the sudden stop of capital inflows. Can monetary policy offset this external credit squeeze? We show that although this may be the case during moderate contractions (or in partial...

This short paper employs individual voting records of the Monetary Policy Committee (MPC) of the Bank of England to study heterogeneity in policy preferences among committee members. The analysis is carried out using a simple generalization of the standard New Keynesian framework that allows...

This article analyzes the role of credit market frictions in business-cycle fluctuations and in the transmission of monetary policy. We estimate a closed-economy dynamic stochastic general equilibrium (DSGE) model for the euro area with financially constrained households and firms and embedding...

This paper quantitatively evaluates the effects of several unconventional monetary policies for small open economies. In particular, a New Keynesian model is extended to include a liquidity premium, deviations from uncovered interest rate parity, and a premium in the term structure of interest...

Monetary policy is modeled as being governed by a known rule, except for a time-varying target rate of inflation. The variable target can be thought of either as standing in for discretionary deviations from the rule or as the outcome of a policymaking committee that is unable to arrive at a...

The data across time and countries suggest the level and variance of inflation are highly correlated. This paper examines the effect of trend inflation on the ability of the monetary authority to ensure a determinate equilibrium and inflation stability in a sticky-price model. Trend inflation...

A comprehensive measure of financial friction is the difference between the return businesses earn from capital—plant and equipment—and the market cost of capital. The latter is the amount that investors earn from holding financial claims. I measure this friction as the difference between...

This paper examines the time-series properties of the price level in five inflation-targeting countries. For the regimes in Australia, New Zealand, Sweden, and the United Kingdom, the price level wanders away from the path implied by the inflation target, and test results suggest that it has a...

This paper reports updated measures of transparency and independence for more than 100 central banks. The indices show that there has been steady movement in the direction of greater transparency and independence over time. In addition, we show that outcomes such as the variability of inflation...