This paper develops a micro-founded general equilibrium model of the financial system composed of ultimate borrowers, ultimate lenders and financial intermediaries. The model is used to investigate the impact of uncertainty about the likelihood of governmental bailouts on leverage, interest...

In this study I examine the welfare implications of monetary policy by constructing a novel New Keynesian model that properly accounts for asset pricing facts. I find that the Ramsey optimal monetary policy yields an inflation rate above 3.5% and inflation volatility close to 1.5%. The same...

This paper aims an empirical investigation of uncertainty in the Euro Zone as well as the US. For this purpose I conduct a factor analysis of uncertainty measures starting in 2001 until the end of 2011. I use survey-based data provided by the ECB and the Federal Reserve Bank of Philadelphia as...

We develop a general equilibrium model of self-fulfilling bank runs in a setting without aggregate risk. The key novelty is the way in which the banking system’s assets and liabilities are connected. Banks issue loans to entrepreneurs who sell goods to households, which in turn pay for the...

We develop a general equilibrium model of self-fulfilling bank runs in a setting without aggregate risk. The key novelty is the way in which the banking system’s assets and liabilities are connected. Banks issue loans to entrepreneurs who sell goods to (impatient) households, which in turn pay...

We analyze the distributional effects of monetary policy on income, wealth and consumption. We use administrative household-level data covering the entire population in Denmark over the period 1987-2014 and exploit a long-standing currency peg as a source of exogenous variation in monetary...

This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. The sort of post-crisis uncertainty that central banks are dealing with today is more profound than that which is...

I use the global crisis of 1914 as a window onto the phenomenon of investor reaction to complex news — such as sudden political upheaval. Based on a novel database of all stocks traded on the NYSE during 1914, along with “real-time” news accounts from major newspapers, I show that NYSE...

This paper shows that increased volatility of Örm-level productivity can push the nominal interest rate to its lower bound with large amplification effects on macroeconomic aggregates. The framework combines a simple canonical Önancial accelerator model, time varying risk shocks, and a zero...