Leaning against the wind of credit booms is a monetary policy that is tighter than what is consistent with standard inflation targeting. This way the central bank tries to address excessive household debt. While the merits of such policy have been analysed, I argue that there are two dimensions...

This paper gives money a role in providing cheap collateral in a model of banking; besides the Taylor Rule, monetary policy can affect the risk-premium on bank lending to firms by varying the supply of M0, so at the zero bound monetary policy is effective; fiscal policy crowds out investment via...

We introduce time-varying systemic risk (à la He and Krishnamurthy, 2014) in an otherwise standard New-Keynesian model to study whether simple leaning-against-the-wind interest rate rules can reduce systemic risk and improve welfare. We find that while financial sector leverage contains...

In this study, we explored the impact of bank leverage and financial frictions on the transmission of real and financial shocks. Two new Keynesian dynamic stochastic general equilibrium (DSGE) models, with and without financial frictions, were employed in the context of the Tunisian economy. In...