How should monetary policy respond to a global liquidity trap, where the two countries may fall into a liquidity trap simultaneously? Using a two-country New Open Economy Macroeconomics model, we first characterise optimal monetary policy, and show that the optimal rate of inflation in one...

Is there asymmetry in the distribution of government bond returns in developed countries? Can asymmetries be predicted using financial and macroeconomic variables? To answer the first question, we provide evidence for asymmetry in government bond returns in particular for short maturities. This...

Do financial frictions call for policy cooperation? This paper investigates the implications of financial frictions for monetary policy in the open economy. Welfare analysis shows that there are long-run gains which result from cooperation, but, dynamically, financial frictions per se do not...

It is well-known that there is a large degree of uncertainty around Rogoff's (1996) consensus half-life of the real exchange rate. To obtain a more efficient estimator, we develop a system method that combines the Taylor rule and a standard exchange rate model to estimate half-lives. Further, we...

Railroads in Meiji Japan are credited with facilitating factor mobility as well as access to human and financial capital, but the impact on firms is unclear. Using a newly developed firm-level dataset and a difference-in-differences model that exploits the temporal and spatial variation of...