In 2005, reforms made formal personal bankruptcy much more costly. Shortly after, the US began to experience its most severe recession in seventy years, and while personal bankruptcy rates rose, they rose only modestly given the severity of the rise in unemployment. By contrast, informal default...

The effectiveness of forward guidance depends on the credibility of the central bank. This paper sheds light on the credible forward guidance that a central bank can offer by solving for the whole set of sustainable sequential equilibrium (SSE) in a canonical New Keynesian model with...

The dangers of high capital flow volatility and sudden stops have led economists to promote the use of capital controls as an addition to monetary policy in emerging market economies. This paper studies the benefits of capital controls and monetary policy in an open economy with financial...