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 …

stability. We model the default of a large bank and analyse the resulting contagion effects. This is compared to a common shock …

This paper studies the effects of three financial shocks in the economy: a net-worth shock, an uncertainty or risk … shock, and a credit-spread shock. We argue that only the latter can push the nominal interest rate against its zero lower … bound. Further, a recessionary shock to the net worth or the credit spread generates a positive response for loans, which is …

combined with the theory of optimum currency areas. It shows how since the turn of the millennium a too expansionary monetary …

phase transition when the consequences of one single initial shock affect the entire population. I show that the size and …