This paper develops a 9-dimensional SVAR to investigate the sources of the U.S. business cycle. We extend the standard set of identified shocks to include unexpected changes in commodity prices. Our main result is that commodity price shocks are a very important driving force of macroeconomic...

This paper develops a small open economy model to investigate the impact of rising sovereign bond market spreads on the real economy. One key element of the model is a "sovereign risk channel" through which tensions in the sovereign bond market tend to spill over into private credit markets. The...

The role of fiscal austerity has been questioned for centuries, but a rapidly increasing deficit along with the financial crisis in 2007 / 2008 influenced a renewed debate on the economics of austerity. This paper analyzes the role of austerity versus the role of economic growth. It also...

Numerous papers have tried to understand housing’s role in the economy and have not reached an agreement. In this paper we turn to the asymmetric relationship between housing and the overall economic activity. We find that the relation between building permits and GDP is regime-dependent....