We merge a financial market model with leverage-constrained, heterogeneous agents with a reduced-form version of the New-Keynesian standard model. Agents in both submodels are assumed to be boundedly rational. The financial market model produces endogenously arising boom-bust cycles. It is also...

In the last decade, advanced economies, including the euro area, experienced deflationary pressures caused by the global financial crisis of 2007-2009 and the anti-crisis policies that followed—in particular, the new financial regulations (which led to a deep decline in the money multiplier)....

We develop a tractable dynamic theory linking endogenous credit cycles with conditions in the labor market, in which a pandemic may cripple credit markets and even cause a credit collapse by freezing the labor supply. We execute the idea in a general equilibrium framework with banks and...

This paper analyses the information content of M1 for euro area real GDP since the beginning of the 1980s and reviews theoretical arguments on why real narrow money should help predict real GDP. We find that, unlike in the U.S., in the euro area, M1 has better and more robust forecasting...

We survey the emerging literature on safe assets. The recent evidence on a time-varying safety premium suggests a demand for safety quite distinct from liquidity and classic money demand, offering insight on a strong segmentation between safe savings and speculative investment markets. A related...

To study implications of an interest-bearing CBDC on the economy, we integrate a New Monetarist-type decentralised market that explicitly accounts for the means-of-exchange function of bank deposits and CBDC into a New Keynesian model with financial frictions. The central bank influences the...

The monetary authority's choice of operating procedure has significant implications for the role of monetary aggregates and interest rate policy on the business cycle. Using a dynamic general equilibrium model, we show that the type of endogenous monetary regime, together with the interaction...

I use micro data to quantify key features of U.S. firm financing. In particular, I establish that a substantial 35% of firms' investment is funded using financial markets. I then construct a dynamic equilibrium model that matches these features and fit the model to business cycle data using...

The rise of inflation in 2021 and 2022 surprised many macroeconomists who ignored the earlier surge in money growth because past instability in the demand for simple-sum monetary aggregates had made these aggregates unreliable indicators. We find that the demand for more theoretically-based...

This paper analyses the information content of M1 for euro area real GDP since the beginning of the 1980s and reviews theoretical arguments on why real narrow money should help predict real GDP. We find that, unlike in the U.S., in the euro area, M1 has better and more robust forecasting...