We propose to incorporate cross-sectional heterogeneity into structural VARs. Heterogeneity provides an additional dimension along which one can identify structural shocks and perform hypothesis tests. We provide an application to bank runs, based on microeconomic deposit market data. We impose...

Evidence on the interdependency between monetary policy and the state of the banking system is scarce. We suggest an integrated micro-macro approach with two core virtues. First, we measure the probability of bank distress directly at the bank level. Second, we integrate a microeconomic hazard...

We analyze financial risk premiums and real economic dynamics in a DSGE model with three types of agents - shareholders, bondholders and workers - that differ in participation in the capital market and in attitude towards risk and intertemporal sub- stitution. Aggregate productivity and...

Increasingly many central banks announce likely paths for future policy rates. Recent experience suggest that market forward rates can differ substantially from those announced. Models commonly adopted in policy analysis ignore such differences. This paper studies a simple model that can capture...

Macroeconomic research often relies on structural vector autoregressions to uncover empirical regularities. Critics argue the method goes awry due to lag truncation: short lag-lengths imply a poor approximation to DSGE-models. Empirically, short lag-length is deemed necessary as increased...

Fiscal theorists warn about the risk of future in.ation as a consequence of current fiscal imbalances in the US. Because actual in.ation remains historically low and data on inflation expectations do not corroborate such risks, warnings for fiscal inflation are often ignored in policy and...