The US government has recently conducted large scale purchases of assets and implemented policies that reduced the cost of funds to financial institutions. Arguably these policies have helped to correct credit market dysfunctions, allowing interest rate spreads to shrink and output to begin a...

We develop a growth model with credit-fueled speculative asset bubbles. In our model, financial intermediaries (banks) use borrowed money to speculate on a risky asset bubble, which promises high returns as long as the bubble does not collapse. However, with limited liability, banks can default...

Post-financial crisis recoveries tend to be slow and be accompanied by slowdowns in TFP and permanent losses in GDP. To prevent them, how should monetary policy be conducted? We address this issue by developing a model with endogenous TFP growth in which an adverse financial shock can induce a...

On September 29, 2008 - two weeks after the collapse of Lehman Brothers, the government of Ireland took the bold step of guaranteeing almost all liabilities of the country's major banks. The total amount guaranteed by the government was more than double Ireland's gross domestic product, but none...

In the aftermath of the recent financial crisis and subsequent recession, slow recoveries have been observed and slowdowns in total factor productivity (TFP) growth have been measured in many economies. This paper develops a model that can describe a slow recovery resulting from an adverse...