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We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the "missing disinflation" during the Great Recession. We apply a vector autoregressive model to US data and identify financial shocks through sign restrictions. Our main finding is that...
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This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under … constrained consumers. Our results confirm the literature on model uncertainty with respect to a cost-push shock. Insuring against … model misspecification leads to a more aggressive policy response. The same is true for a shock to collateral. A preference …
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