The effectiveness of forward guidance depends on the credibility of the central bank. This paper sheds light on the credible forward guidance that a central bank can offer by solving for the whole set of sustainable sequential equilibrium (SSE) in a canonical New Keynesian model with...

This paper examines the role of collateral in "sudden stop" models that feature occasionally binding constraints and endogenous growth. We show how different assumptions regarding the nature and valuation of collateral alter the dynamics of crisis episodes and the welfare costs of pecuniary...