We study the ability of exclusion and sign restrictions to measure monetary policy shocks in small open economies. Our Monte Carlo experiments show that sign restrictions systematically overshoot inflation responses to the said shock, so we propose to add prior information to limit the number of...

Empirical and institutional evidence finds considerable time variation in the degree of wage indexation to past inflation, a finding that is at odds with the assumption of constant indexation parameters in most New-Keynesian DSGE models. We build a DSGE model with endogenous wage indexation in...

This paper studies the effects of three financial shocks in the economy: a net-worth shock, an uncertainty or risk shock, and a credit-spread shock. We argue that only the latter can push the nominal interest rate against its zero lower bound. Further, a recessionary shock to the net worth or...

The COVID-19 pandemic not only generated real shocks affecting economic activity severely, but also a broad uncertainty that unleashed an extreme shock to financial markets. In this paper, we focus on the financial dimension of the pandemic from the viewpoint of an emerging market economy....