This paper studies the equilibrium determinacy properties of a simple interest rate rule in a small open economy subject to currency substitution (i.e., the use of a foreign currency for domestic transactions) and risk premia on foreign borrowing. It shows that if currencies are substitute in...

We embed Max Weber (1958)'s spirit of capitalism (SOC) into an otherwise standard Lucas' tree asset pricing model, by assuming that economic agents care about their social status and that the latter is related to financial wealth. We show that, absent uncertainty, for a wide range of values for...

We present a heterogeneous agents New-Keynesian model subject to a cost channel of monetary policy transmission. Constant turnover between long-time traders and newcomers in market activities, combined with restricted trading opportunities, introduces a feedback from the stock market to real...

This paper studies the equilibrium determinacy properties of a simple interest rate rule in a small open economy subject to endogenous dollarization (the use of a foreign currency in transactions) and international financial frictions (proxied by a feedback from external debt to sovereign risk...

We study optimal monetary policy in a New Keynesian-DSGE model where the combination of a credit channel and customer-market features in banking gives rise to counter-cyclical credit spreads. In our setting, monopolistically competitive banks set lending rates in a forward-looking fashion as...

We study interest rate rules responding to stock prices in a sticky-price sticky-wage New-Keynesian framework subject to consumption externalities. For given wage rigidity, such rules are beneficial to equilibrium determinacy if households’ preferences feature sufficiently strong...

We study a New-Keynesian DSGE model subject to limited asset market participation (LAMP) and assess whether monetary policy should respond to stock prices for what concerns the determinacy and the learnability (E-stability) of the Rational Expectations Equilibrium (REE). We find that interest...