This paper examines aggregate savings in a general equilibrium model where infinitely lived households face volatile (and possibly uncertain) income paths, hold a risk-free asset, and face a liquidity constraint. I first show that the equilibrium capital stock in an economy without uncertainty,...

We examine the effect of monetary policy on household spending when households are indebted and interest rates on outstanding loans are linked to short-term interest rates. Using administrative data on balance sheets and consumption expenditure of Swedish households, we reveal the cash-flow...

We examine the cash-flow channel of monetary policy, i.e. the effect of monetary policy on spending when households hold debt linked to short-term rates such as adjustable rate mortgages (ARMs). Using registry-based data on Swedish households, we estimate substantial heterogeneity in consumption...

This note examines the accuracy of methods that approximate AR(1) processes with discrete Markov chains. Tauchen and Hussey's [Tauchen, G., Hussey, R., 1991. Quadrature-based methods for obtaining approximate solutions to nonlinear asset pricing models. Econometrica 59, 371-396] method has...

Sweden was hit by a severe macroeconomic crisis in the early 1990s. GDP fell for three consecutive years in 1991–1993, unemployment increased by 9 percentage points, banks had to be nationalized, and public budget deficits exceeded 10 percent of GDP. The recovery was however quick. GDP growth...