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We show that firms' nominal required returns to capital (i.e., their discount rates) are sticky with respect to expected inflation. Such nominally sticky discount rates imply that increases in expected inflation directly lower firms' real discount rates and thereby raise real investment. We...
Persistent link: https://www.econbiz.de/10014512092
effects on the VIX and other risk-related measures point towards a dominant risk premium channel. We show that the non …
Persistent link: https://www.econbiz.de/10014576665
Central banks often face tradeoffs in how their monetary policy decisions impact economic activity (including employment), inflation and the price level. This paper assesses how these tradeoffs have evolved over time and varied across countries, with a focus on understanding the post-pandemic...
Persistent link: https://www.econbiz.de/10015409857
This paper studies how household inequality shapes the effects of the zero lower bound (ZLB) on nominal interest rates on aggregate dynamics. To do so, we consider a heterogeneous agent New Keynesian (HANK) model with an occasionally binding ZLB and solve for its fully non-linear stochastic...
Persistent link: https://www.econbiz.de/10014287383
Do periods of persistently loose monetary policy increase financial fragility and the likelihood of a financial crisis? This is a central question for policymakers, yet the literature does not provide systematic empirical evidence about this link at the aggregate level. In this paper we fill...
Persistent link: https://www.econbiz.de/10014226155
market power, or credit risk. Variation in credit risk does materially affect monetary policy transmission to corporate bonds …
Persistent link: https://www.econbiz.de/10014486229
needs to set. These perceived "mistakes" induce a policy risk premium and may generate a "behind the curve" phenomenon …
Persistent link: https://www.econbiz.de/10013334351
International data suggests that fluctuations in the level and volatility of the world interest rate (as measured by the US treasury bill rate) are positively correlated with both the level and volatility of sovereign spreads in emerging economies. We incorporate an estimated time-varying...
Persistent link: https://www.econbiz.de/10012481187
expansionary. We discuss the split between direct and indirect effects of policy, and also the implications of cyclical income risk …
Persistent link: https://www.econbiz.de/10015072932
This paper surveys the decline in real interest rates in advanced and emerging economies over the past several decades, linking that process to a range of global factors that have operated with different force in different periods. The paper argues that estimates of long-run equilibrium real...
Persistent link: https://www.econbiz.de/10014447270