The author develops a dynamic stochastic general-equilibrium model with an active banking sector, a financial accelerator, and financial frictions in the interbank and bank capital markets. He investigates the importance of banking sector frictions on business cycle fluctuations and assesses the...

The author proposes a micro-founded framework that incorporates an active banking sector into a dynamic stochastic general-equilibrium model with a financial accelerator. He evaluates the role of the banking sector in the transmission and propagation of the real effects of aggregate shocks, and...

I construct a tractable model to evaluate the liquidity shock hypothesis that exogenous shocks to equity market liquidity are an important cause of the business cycle. After calibrating the model, I find that a large and persistent negative liquidity shock can generate large drops in investment,...

A challenge for quantity-theoretic explanations of business cycles is that recessions manifest despite central banks' scrupulousness to avoid falls in monetary aggregates, a fact which would seem to indicate a structural explanation. This paper argues that a broader and theoretically richer...

This note shows that non-U.S. yield curves contain information about future U.S. recessions and economic activity. Using quarterly data from 1979-2021, a foreign term spread constructed from the bond yields of G-7 constituents is included in regressions of U.S. recession risk and U.S. real GDP...

A widespread misbelief asserts that an efficient market would arbitrage out any cyclical or otherwise partially-predictable, non-random-walk pattern on the observed market prices time series. Hence, when such patterns are observed, they are often attributed to either irrational behavior or...

Our study aims to bridge the gap between contemporary studies on financial cycles and the financial instability hypothesis in the form of a Minsky cycle (Minsky, 1963). Paper contribution range from explored causality links (financial cycles cause business cycles) to the empirical estimation of...

We measure the extent to which the cyclical behavior of the turnover of equity shares generated by individual investors on the New York Stock Exchange can be accounted for by a single source of trade embedded in a neoclassical growth economy with dynamically complete markets. The source of trade...

This paper incorporates information frictions in a credit cycle model, in which agents learn from prices. We find that learning from prices amplifies boom-bust dynamics. As a result, this influences the role of macroprudential policies that impact aggregate outcomes such as credit spreads. In...

This paper studies the role of narratives for macroeconomic fluctuations. Microfounding narratives as directed acyclic graphs, we show how exposure to different narratives can affect expectations in an otherwise-standard macroeconomic framework. We identify such competing narratives in news...