Explanations of why changes in the relative quantities of safe debt seem to affect asset prices often appeal informally to a portfolio balance mechanism. I show how this type of effect can be incorporated in a general class of structural, arbitrage-free asset-pricing models using a numerical...

Long-term interest rates in a number of small-open inflation targeting economies co-move more strongly with US long-term rates than with short-term rates in those economies. We augment a standard small open-economy model with imperfectly substitutable government bonds and time-varying term...

To evaluate measures of expectations I examine and compare some of the most common methods for capturing expectations: the futures method which utilizes financial market prices, the VAR forecast method, and the survey method. I study average expectations on the Federal funds rate target, and the...

This paper explains the emergence of liquidity traps in the aftermath of large-scale financial crises, as happened in the US 1930s, Japan 1990s and recently in the US and Europe. The paper introduces a new balance sheet channel that links equity capital to the risk-free interest rate. When...

The last global crisis brought the monetary policy risk-taking channel to the fore, arguing that lingering low interest rates might affect not only the quantity, but the quality of credit extended as well. In line with this debate, this paper is the first effort to empirically investigate the...

For Matías Vernengo and Esteban Pérez Caldentey (2020), the MMT literature overemphasizes the choice of the exchange rate regime and the relevance of a flexible exchange rate regime, as well as the ultimate effect of that choice upon the policy space. In addition, they argue that the role of...

We exploit the Fed's Treasury purchases conducted from March 2020 to March 2022 to assess whether asset purchases can be tailored to accomplish different objectives: restoring market functioning and providing stimulus. We find that, on average, flow effects are significant in the...

This paper presents a model that pictures how inflation is determined in a decentralized market process where prices are set in both simultaneous and sequential contracts. Price setting is seen as a coordination game between the price setters of sequential contracts. An important property of the...