This paper develops a dynamic general equilibrium model that is intended to help clarify the role of credit market frictions in business fluctuations, from both a qualitative and a quantitative standpoint. The model is a synthesis of the leading approaches in the literature. In particular, the...

This paper develops a simple neoclassical model of the business cycle in which the condition of borrowers' balance sheets is a source of output dynamics. The mechanism is that higher borrower net worth reduces the agency costs of financing real capital investments. Business upturns improve net...

Dr. Ben S. Bernanke, the Chairman of the Council of Economic Advisers, and nominee to be Chairman of the Board of Governors of the Federal Reserve System, explains why the "Leave it to Beaver model of economic security is increasingly less viable in today's world," and describes what can be done...

This paper analyzes the impact of unanticipated changes in the Federal funds target on equity prices, with the aim of both estimating the size of the typical reaction, and understanding the reasons for the market's response. On average over the May 1989 to December 2001 sample, a "typical"...

Over the past twenty years the world's major central banks have been largely successful at bringing inflation under control. While it is premature to suggest that inflation is no longer an issue of great concern, it is quite conceivable that the next battles facing central bankers will lie on a...