This paper explores how a monetary regime change affects headline inflation via differential effects on various sectors in the economy. Using disaggregated CPI data for Canada, we find that the response to the adoption of inflation targeting (IT) was quite heterogeneous across sectors. While...

An extensive literature has analyzed the implications of hidden shifts in the dividend growth rate. However, corresponding research on learning about growth persistence is completely lacking. Hidden persistence is a novel way to introduce long-run risk into standard business-cycle models of...

Can monetary policy trigger pronounced boom-bust cycles in house prices and create persistent business cycles? We address this question by building heuristics into an otherwise standard DSGE model. As a result, monetary policy sets off waves of optimism and pessimism (“animal spirits”) that...

We seek to quantify the impact on euro area GDP of the European Economic Recovery Plan (EERP) enacted in response to the financial crisis of 2008–2009. To do so, we estimate an extended version of the ECB's New Area-Wide Model with a richly specified fiscal sector. The estimation results point...

We propose a hierarchical Marshall–Olkin model of countrywide systemic risk. At the lower level, we model the systemic risk of a crisis within the banking system (that we call “within” systemic risk) and at the higher level we model the probability of a joint default of the banking system...

Based on a tractable “endogeneous technology choice” framework, we provide a microfoundation for aggregate normalized constant elasticity of substitution (CES) production functions with non-neutral, factor-augmenting technical change. In this framework, firms are allowed to choose unit...

This paper studies the effects of multiple investment horizons and investors' bounded rationality on the price dynamics. We consider a market with one risky asset with agents maximizing expected utility of wealth over discrete investment periods. Investors' demand for the risky asset may depend...

We consider a Ramsey model with a continuum of Cournotian industries where free entry generates an endogenous markup. The model produces two different regimes, monopolistic and Cournotian monopolistic competition, resulting in non-smooth dynamics. We analyze the global dynamics of the model,...

In this paper, we prove a maximum principle for general stochastic differential Stackelberg games, and apply the theory to continuous time newsvendor problems. In the newsvendor problem, a manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits...

This paper contributes to the debate on EMU fiscal governance. We simulate a small-scale macroeconomic model with forward-looking agents, augmented with a public finance block. We account for positive (output stabilization) and negative (via risk premia) effects of debt and deficit. We compare...