We develop a dynamic general equilibrium model with an imperfectly competitive bank-loans market and collateral constraints that tie investors credit capacity to the value of their real estate holdings. Banks set optimal lending rates taking into account the effects of their price policies on...

In the U.S., over 1873-2014, an increase in bank credit is associated with a lower risk of a financial crisis in the near future. Bank credit expansion predicts lower excess returns and volatility for the aggregate stock market, and this predictive relation varies in the cross-section and is...

Indonesia fielded shocks due to the Asian financial crisis (AFC) and the global financial crisis (GFC) quite differently. Financial contagion, policy misdirection, panic and political upheaval saw the AFC bring economic collapse. The decade-later GFC, however, brought real growth of 6.1% (2008)...

We extract aggregate demand and supply shocks for the US economy from real-time survey data on inflation and real GDP growth using a novel identification scheme. Our approach exploits non-Gaussian features of macroeconomic forecast revisions and imposes minimal theoretical assumptions. After...

This article explores the macroeconomic role that risk plays using the BAA-AAA spread as the measure of risk. First, it shows that meaningful upward movements in this spread are associated with recessions and their severity. Second, it includes the BAA-AAA spread in a structural...

We shed new light on the effects of monetary policy shocks in the US. Gertler and Karadi (2015) suggest that movements in credit costs may result in substantial impact of monetary policy shocks on economic activity. Using the proxy SVAR framework, we show that once the Volcker disinflation...

In this paper, we revisit the debate on the effects of monetary policy shocks in the U.S. economy. In a recent study, Gertler and Karadi (2015) suggest that movements in credit costs help to capture the transmission mechanism of monetary policy to the aggregate economy through the credit...

This paper examines the effectiveness of monetary aggregates through various nominal interest rates by integrating the financial sector into the Cash-in-Advance (CIA) economy. The model assumes that there are two types of representative agents in the financial sector, which are: productive banks...

When financial regulators require banks to hold a higher ratio of equity capital to debt funding, banks incur short-term costs as they adjust their balance sheets and lose some of the advantages associated with their existing funding mix. They then seek to maintain post-tax income by, for...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modeled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...