We built a real business cycle model with inside money and passive monetary policy that shows some interesting features regarding interest rate dynamics and credit market behavior. We find that the model is stable, a feature that was difficult to find in the literature on passive money. We think...

Financial liberalisation and innovation (FLIB) in Australia over the 1980s and 1990s provided the institutional backdrop for one of the most rapid increases in household balance sheets and house prices in the world. An equilibrium correction model of quarterly Australian house prices for...

I study the consumption responses of heterogeneous households following changes in both house prices and interest rates. I show the common assumption that household period utility is separable in housing and consumption can be consistent with the observed co-movement between these two series...

A standard two-sector sticky price model with flexibly priced durables depicts negative co-movement between durables and non-durables after a monetary policy shock, which is at odds with the empirical evidence. This paper proposes a new channel, non-separable preferences with a small wealth...

In a context in which individuals might default on their debts and subsequently be excluded from credit markets, holding money helps agents smooth their consumption during periods in which they cannot borrow. Therefore holding money makes the punishment to default less severe. In this context,...

This paper implements an affine term structure model that accommodates "unspanned" macro risks for the Euro area, i.e. distinct from yield-curve risks. I use a Near-Cointegrated VAR-like approach to obtain a better estimation of the historical dynamics of the pricing factors, thus providing more...

This paper re-examines the out-of-sample predictive power of interest rate spreads when the short-term nominal rates have been stuck at the zero lower bound and the Fed has used unconventional monetary policy. Our results suggest that the predictive power of some interest rate spreads have...

This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values) and minimizing the volatility of the policy interest...

This paper examines the macroprudential roles of bank capital regulation and monetary policy in a Dynamic Stochastic General Equilibrium model with endogenous financial frictions and a borrowing cost channel. We identify various transmission channels through which credit risk, commercial bank...

Abstract This is a review article; its purpose is to support a debate on the use of the best available economic theory and evidence in monetary policy in contemporary South Africa. In order to do so, I contrast South Africa's laissez-faire management of capital flows with the experience of other...