We develop an asymmetric, two-country equilibrium business cycle model to study the role of international trade in transmitting and propagating the real effects of global financial shocks. Our model predicts that a recession in a large economy considerably alters a recession in its smaller trade partner, with distinct investment dynamics driving the transmission.
This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality.
This paper studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or completely taken care of by a contract on the outcome.
This paper evaluates the international spillover effects of large-scale asset purchases (LSAPs) using a two-country dynamic stochastic general-equilibrium model with nominal and real rigidities, and portfolio balance effects.
Estimating potential output and the output gap - the difference between actual output and its potential - is important for the proper conduct of monetary policy. However, the measurement and interpretation of potential output, and hence the output gap, is fraught with uncertainty, since it is unobservable.
In this paper, we build a dynamic stochastic general-equilibrium model with housing and household debt, and compare the effectiveness of monetary policy, housing-related fiscal policy, and macroprudential regulations in reducing household indebtedness.
Macroeconomists have traditionally ignored the behavior of temporary price markdowns (“sales”) by retailers. Although sales are common in the micro price data, they are assumed to be unrelated to macroeconomic phenomena and generally filtered out.
This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making.
Guided by a macroeconomic model in which non-energy commodity prices are endogenously determined, we apply a new factor-based identification strategy to decompose the historical sources of changes in commodity prices and global economic activity.