We use insights from the literature on currency crises to offer an analytical treatment of the crisis in the market for Greek government bonds. We argue that the crisis itself and its escalating nature are very likely to be the result of: (a) steady deterioration of Greek macroeconomic...

Recent work based on sticky price-wage estimated dynamic stochastic general equilibrium (DSGE) models suggests investment shocks are the most important drivers of post-World War II US business cycles. Consumption, however, typically falls after an investment shock. This finding sits oddly with...

We estimate a dynamic stochastic general equilibrium (DSGE) model with several frictions and both unanticipated and news shocks, using quarterly US data from 1954-2004 and Bayesian methods. We find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of...

Recent work based on sticky price-wage estimated dynamic stochastic general equilibrium (DSGE) models suggests investment shocks are the most important drivers of post-World War II US business cycles. Consumption, however, typically falls after an investment shock. This finding sits oddly with...

Corporate bond issuance has followed an upward trend in the last decade that has tripled the volume of corporate public debt. There is a long literature on reasons why firms choose this option, which has recently explored the influence of a firm’s reputation on the decision to go public. The...

Is cash flow important in explaining investment dynamics? A large body of empirical work argues that it is. This finding is further taken as evidence of capital market imperfections. We argue that time-to-build for capital projects creates an investment cash flow sensitivity as found in...

What is the role of inventories in UK manufacturing? We present and estimate a model of inventories that considers separately finished goods and input (i.e. the sum of raw materials and work-in-process) inventories. We estimate structural parameters which allows us to make inferences on the role...

We consider an (otherwise standard) New Neoclassical Synthesis theoretical framework that allows a role for money. Money in our model has an informational role which consists in facilitating the estimation of the unobserved shocks that drive potential output and thus the state of the economy....

This article, originally published at www.roubini.com on 7 February 2010, spells out our two-currency EMU proposal as a plan of last resort for resolving the present EMU sovereign-debt crisis. The key ingredients of our proposal involve a temporary split of the euro into two currencies, both run...