We integrated frictional financial intermediation into a Tractable Heterogeneous Agents New Keynesian model. With the incorporation of income risk, the rare events trigger a sharper consumption decline due to precautionary saving. Aggregate rare events shock exacerbate income and consumption...

In this paper, we revisit the scope for macroprudential policy in production economies with pecuniary externalities and collateral constraints. We study competitive equilibria and constrained-efficient equilibria and examine the extent to which the gap between the two depends on the production...

We propose a new approach for the efficient and robust Bayesian estimation of medium- and large-scale DSGE models with occasionally binding constraints. At its core lies the Ensemble Kalman filter, a novel nonlinear recursive filter, which allows for fast likelihood approximations even for...

We build a business cycle model characterized by endogenous firm dynamics, where banks may prefer debt renegotiation, i.e. non-performing exposures, to outright borrowers' default. Debt renegotiations per se do not have adverse effects in the event of financial crisis episodes, but a large share...

Recent research shows that time-varying volatility plays a crucial role in nonlinear modeling. Contributing to this literature, we suggest a DSGE-GARCH approach that allows for straightforward computation of DSGE models with time-varying volatility, where the volatility component is formulated...

Optimal monetary policy studies typically rely on a single structural model and identification of model-specific rules that minimize the unconditional volatilities of inflation and real activity. In our proposed approach, we take a large set of structural models and look for the model-robust...

This paper evaluates the macroeconomic effects of foreign and domestic central bank government bond purchases on the Swedish economy before and during the Corona pandemic using a small open economy DSGE model with segmented asset markets. In this model, the effects of foreign and domestic...