Low and unresponsive inflation has been termed a “puzzle.” The paper describes a formula for which these conditions have been a prediction since early 2016.The Money Value Formula analyzes the unit value of a currency solely as a function of long lags of monetary aggregates. The Formula...

Two extraordinary inflation surprises of the last generation were the longstanding inflation shortfall from central bank targets and now the pandemic inflationary.Inflation shortfalls can be attributed to characteristics of monetary systems represented by a model with increasing inelasticity,...

This paper models the global financial crisis as a combination of shocks to global housing markets and sharp increases in risk premia of firms, households, and international investors in an intertemporal (dynamic stochastic general equilibrium or DSGE) global model. The model has six sectors of...

This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values) and minimizing the volatility of the policy interest...

We develop a dynamic stochastic full equilibrium New Keynesian model of two open economies based on stochastic differential equations to analyse the interdependence between monetary policy and financial markets in the context of the recent financial crisis. The effect of bubbles on stock and...

To analyse the interdependence between monetary and fiscal policy during a financial crisis, we develop an open-economy DSGE model with monetary and fiscal policy as well as financial markets in a continuous-time framework based on stochastic differential equations. Monetary policy is modelled...

The recent global financial crisis has increased interest in macroeconomic models that incorporate financial linkages. Here, we compare the simulation properties of five medium-sized general equilibrium models used in eurosystem central banks which incorporate such linkages. The financial...

To analyse the interdependence between monetary policy and financial markets in the context of the recent financial crisis, we use stochastic differential equations to develop a dynamic, stochastic general equilibrium New Keynesian model of two open economies. Our focus is on how stock and...

Many commentators have argued that if the Federal Reserve had followed a stricter monetary policy earlier this decade when the housing bubble was forming, and if Congress had not deregulated banking but had imposed tighter financial standards, the housing boom and bust - and the subsequent...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...