In a standard open-economy New Keynesian model, the effective lower bound causes anomalies: output and terms of trade respond to a supply shock in the opposite direction compared to normal times. We introduce a tractable two-country model to accommodate for unconventional monetary policy. In our...

In a standard open-economy New Keynesian model, the effective lower bound causes anomalies: output and terms of trade respond to a supply shock in the opposite direction compared to normal times. We introduce a tractable framework to accommodate for unconventional monetary policy. In our model,...

German unification hit the West German economy in a prosperous period and appeared as a huge demand shock at least for the first few quarters. This combination resulted in a major increase of imports from the main trading partners of West Germany, which may have helped to cushion recessionary...

We provide international evidence on the issue of whether the optimizing IS equation is more stable than a backward-looking alternative. This evidence consists of estimates of IS equations on quarterly data for the UK and Australia, both for the full sample of the last 40 years and for the...

German unifikation hit the West German economy in a prosperous and appeared as a huge demand shock at least for the first few quarters. This combination resulted in a major increase of imports from the main trading partners of West Germany, which may have helped to cushion recessionary trends...

This paper studies the effectiveness of forward guidance when central banks have imperfect credibility. Exploiting unique survey-based measures of expected inflation, output growth, and interest rates, we estimate a small-scale New Keynesian model for the United States and other G7 countries...