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Since the publication of Keynes' "General Theory of Employment, Interest, and Money" in 1936 many new ideas and … dynamic stochastic general equilibrium with Keynesian elements such as nominal price rigidities and market imperfections … where banks endogenously enter and leave the market. The resulting model generates significant amplification and persistence …
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How should monetary policy be optimally designed in an environment with high degrees of financial globalization? To answer this question we lay down an open economy model where net lending toward the rest of the world is constrained by a collateral constraint motivated by limited enforcement....
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