In the last two decades a body of literature highlights the role of financial frictions for explaining the development of key macroeconomic variables. Moreover, the financial crisis 2007-2009 again sheds light on the importance of this topic. In this paper, we contribute to the literature by...

When the current financial crisis has widened to a global economic crisis an urgent call for implementing financial markets and financial institutions in business cycle models emerged. By modelling commercial banks as a third type of economic agent, we are able to implement the feature of early...

As GDP is highly correlated with both entering and exiting firms, we develop a totally microfounded DSGE model with endogenous firms entry as well as exit decisions. We show that the simplifying assumption of a constant firms' death rate made by the recent literature on DSGE modelling can lead...

The aim of this paper is to solve the inconsistency problem à la Barro and Gordon within a New Keynesian model and to derive time-consistent (stable) interest rate rules of Taylor-type. We find a multiplicity of stable rules. In contrast to the Kydland/Prescott-Barro/Gordon approach,...

This paper explores different fiscal stimuli within a business cycle model with an endogenous number of firms. We demonstrate that a changing number of firms is a crucial dimension for evaluating fiscal policy since it accelerates the impacts of fiscal policy. In the presence of demand stimuli...

Currently, private trust in commercial banks declines as a consequence of today´s financial crisis. As past crises, e.g. the Asian crisis, show, the loss of confidence in the financial sector typically causes private agents to withdraw their capital from financial institutions. Thus, the...