Luik, Marc-André; Wesselbaum, Dennis - In: Journal of Macroeconomics 40 (2014) C, pp. 27-41
This paper builds a New Keynesian model with financial frictions and monetary and fiscal rules for the United States. We incorporate a rational bubble process in the (relative) price of capital. Our results show that bubbles account for a significant amount of variance in key macroeconomic...