The argument that policy risk, i.e. uncertainty about monetary and fiscal policy, has been holding back the economic recovery in the U.S. during the Great Recession has a large popular appeal. We analyze the role of policy risk in explaining business cycle fluctuations by using an estimated New...

We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages...

Empirical studies of open-market share repurchases in the U.S. typically find a mean abnormal return around the announcement day of about 3%. In Germany share repurchases were highly restricted before May 1998. Since then firms have repurchased shares in the open market more than 250 times....

This paper derives new results on the effects of employing Taylor rules in economies that are subject to real market imperfections such as production externalities. Taylor rules that aggressively respond to output can eliminate sunspot equilibria that arise from the increasing returns. The paper...

This paper studies a dynamic general equilibrium model with sticky prices and rational expectations in an environment of low interest rates and deflationary pressures. We show that small changes in the public's beliefs about the future inflation target of the government can lead to large swings...

We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages...

This paper presents a model of asymmetric (S,s) pricing. We investigate whether the asymmetry on micro level is carried over on macro level and what is the role of agent heterogeneity in the process. We look at two kinds of asymmetries: (i) asymmetric output responses monetary shocks and (ii)...

The paper explains internationally transmitted boom-and-bust cycles as the outcome of excessive liquidity supply based on the credit boom theories of Hayek (1929; 937), Mises (1912) and Minsky (1986). We show how too expansionary monetary policies cause distortions in the economic structure and...

We focus on a quantitative assessment of rigid labor markets in an environment of stable monetary policy. We ask how wages and labor market shocks feed into the inflation process and derive monetary policy implications. Towards that aim, we structurally model matching frictions and rigid wages...

Most analyses of the U.S. Great Moderation have been based on structural VAR methods, and have consistently pointed towards good luck as the main explanation for the greater macroeconomic stability of recent years. Based on an estimated New-Keynesian model in which the only source of change is...