Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. The purpose of this paper is to investigate the importance of certain credit market imperfections...

This paper explores the link between agent expectations and housing market dynamics. We focus on shifts in the fundamental driving forces of the economy that are anticipated by rational forward-looking agents, i.e. news shocks. Using Bayesian methods and U.S. data, we find that...

We estimate a modified version of the "Financial Business Cycles" model originally developed by Iacoviello (2015) in order to investigate the role played by financial factors in driving the business cycle in the euro area. In the model, financial shocks such as borrower defaults, collateral...

After the recent banking crisis in 2008, financial market conditions have turned out to be a relevant factor for economic fluctuations. This paper provides a quantitative assessment of the impact of financial frictions on the U.S. business cycle. The analysis compares the original Smets and...

How and to what extent are small open economies affected by international shocks? I develop and estimate a medium scale DSGE model that addresses both questions. The model incorporates i) international markets for firm-to-firm trade in production inputs, and ii) producer heterogeneity where...

This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these...

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

To analyze the international transmission of business cycle fluctuations, we propose a new multilevel dynamic factor model with a block structure that (i) does not restrict the factors to being orthogonal and (ii) mixes data sampled at quarterly and monthly frequencies. By means of Monte Carlo...

We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial...

This paper compares from a Bayesian perspective three dynamic stochastic general equilibrium models in order to analyse whether financial frictions are empirically relevant in the Euro Area (EA) and, if so, which type of financial frictions is preferred by the data. The models are: (i) Smets and...