Which are the main frictions and driving forces of business cycle dynamics in a small open economy? To answer this question we extend what is becoming the standard new Keynesian model in three dimensions. First, we incorporate frictions in the financing of the capital stock. Second, we model...

This paper provides a stylized model of the workings of a global economy where one of its key driving factors is economic agents' continuous struggle to find assets in which to park financial resources. This struggle naturally comes with euphoria and disappointments, as many of the "parking...

How important are financial and labor market frictions for the business cycle dynamics of a small open economy? What are the quantitative effects of increased financial risk on output and inflation? What drives the variation in the intensive and extensive margin of labor supply? What are the...

This paper revisits the predictability of bond excess returns by means of long-term forward interest rates. We assess the economic value of out-of-sample forecasting ability of empirical models based on forward rates in a dynamic asset allocation strategy. Our results show that the information...

Animal Spirits (2009) is a timely and widely appreciated work focusing on the need to incorporate behavioral factors in macroeconomic analysis that draws on a famous reference of John Maynard Keynes. Nonetheless, it has a number of limitations. Those in several chapters are noted. Most...

This paper describes the theoretical structure and estimation results for a DSGE model for the Macedonian economy. Having as benchmark the model of Copaciu et al. (2015), modified to allow for a fixed exchange rate, we are able to match relatively well the volatility observed in the data. Given...

This paper describes the theoretical structure and estimation results for a DSGE model for the Macedonian economy. Having as benchmark the model of Copaciu et al. (2015), modified to allow for a fixed exchange rate, we are able to match relatively well the volatility observed in the data. Given...

I extend traditional projection methods by using neural networks as a function approximator to solve continuous-time models. The method is well-suited for high-dimensional settings such as those that arise in the presence of many assets, and can capture the strong non-linearities that occur for...

Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart increase in commercial bank liabilities, such as short-term deposits issued to finance...