We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which - similar to Brunnermeier and Sannikov (2010) - adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To...

We analyze the feedback mechanisms between economic downturns and financial stress for several euro area countries. Our study employs newly constructed financial condition indices that incorporate banking variables extensively. We apply a non-linear Vector Smooth Transition Autoregressive...

In this work, we investigate the interrelations among technology, output and employment in the different states of the U.S. economy (recessions vs. expansions). More precisely, we estimate different threshold vector autoregression (TVAR) models with TFP, hours, and GDP, employing the latter as...

The economic meltdown since 2008-9 has created disinflation, and even deflation in some countries in the Euro-area, in a period with large debt overhang, creating the condition for a continuing financial market stress in the Euro-area. As disinflation and deflation push up the real interest...

Monetary responses to financial stress have recently become an important issue in macroeconomic and policy discussions in the USA as well as in the EU. In this paper, the authors study two regimes of monetary responses. While the fundamentals of an economy are assumed to have a long-run...