We study the determinants for the sovereign credit default swap (CDS) spreads of five Euro-area countries (Greece, Ireland, Italy, Portugal, Spain) in the post-Lehman-Brothers period. We find that there are regime switches in the process of sovereign CDS spread changes. We consider three...

Recent cross-country studies on the globalization and output-inflation tradeoff correlation find openness has no significant effect on OECD countries. Those studies assume parameter constancy across countries. In this paper, we argue that this assumption does not hold for major industrialized...

This paper constructs a macro-finance model with two types of borrowers: entrepreneurs who engage in productive activities and gamblers who play in lotteries. It links a central bank's interest rate policy to expected cash flows of both types of borrowers. Via this link we study how the...

We study the determinants of sovereign CDS spreads of five Euro Area countries (Greece, Ireland, Italy, Portugal, and Spain) after the collapse of Lehman Brothers. We find that global and/or European Monetary Union (EMU)-wide factors are the main drivers of changes in the sovereign CDS spreads...

In this paper we estimate a New-Keynesian DSGE model with heterogeneity in price and wage setting behavior. In a recent study, Coibion and Gorodnichenko (2011) develop a DSGE model, in which firms follow four different types of price setting schemes: sticky prices, sticky information, rule of...

During the recent financial crisis, central banks have provided liquidity and governments have set up rescue programmes to restore confidence and stability, often against the LLR principle advocated by Bagehot. Using a model of a systemic bank suffering from liquidity shocks, we find that the...