This study investigates the interrelation between the household leverage cycle, collateral constraints, and monetary policy. Using data on the U.S. economy, we find that a contractionary monetary policy shock leads to a large and significant fall in economic activity during periods of household...

The 2008 financial crisis has shown that financial busts can influence the real economy. However, there is less evidence to suggest that the same holds for financial booms. Using a Markov-Switching vector autoregressive model and euro area data, I show that financial booms tend to be less...

Counter to the credit channel of monetary transmission, monetary policy tightening induces a rise in lending by two different types of non-bank financial institutions (NBFI): shadow banks and investment funds. A monetary DSGE model is able to replicate the empirical facts when augmented with...

Remittance inflows from overseas workers are an important source of foreign funding for developing and emerging economies. The literature is in- conclusive about the cyclical nature of remittance inflows. To the extent remittances are procyclical they pose a challenge to monetary policy: a...

The secular decline in the equilibrium real interest rate observed over the past decades has materially limited the room for policy-rate reductions in recessions, and has led to a marked increase in the incidence of episodes where policy rates are likely to be at, or near, the effective lower...

We review macroeconomic performance over the period since the Global Financial Crisis and the challenges in the pursuit of the Federal Reserve's dual mandate. We characterize the use of forward guidance and balance sheet policies after the federal funds rate reached the effective lower bound. We...

Central bank announcements have strong effects on interest rates, but small or even counterintuitive effects on economic expectations. Based on tick-by-tick futures prices on bonds and stock prices, I confirm these seemingly puzzling results for the euro area and provide evidence that they are...

This paper estimates a business cycle model with endogenous firm entry by matching impulse responses to a monetary policy shock in US data. Our VAR includes net business formation, profits and markups. We evaluate two channels through which entry may influence the monetary transmission process....

Central bank announcements move financial markets. The response of inflation and growth expectations, on the other hand, is often small or even counterintuitive. Based on tick-by-tick futures prices on bonds and stock prices, I confirm these seemingly puzzling results for the euro area and...