This comment points out mismeasurement of variables in the DSGE model in Smets and Wouters (2007) and in models that follow the Smets-Wouters measurement procedures. The mismeasurement errors appear to be large

In this paper, we introduce our GDSGE framework and MATLAB toolbox for solving dynamic stochastic general equilibrium models with a novel global solution method. The framework encompasses many well-known incomplete markets models with highly nonlinear dynamics such as models on financial crises,...

Forward guidance operates via the expectations formation process of the agents in the economy. In standard quantitative macroeconomic models, the expectations are unobserved state variables and little scrutiny is devoted to analysing the dynamic behaviour of these expectations. We show that the...

Crisis dynamics are nonlinear. What drives nonlinearities in modern macroeconomic models? Building on global methods, the present paper isolates the effects associated with an occasionally binding constraint in a widely discussed macro-finance framework. Only the proper computational treatment...

The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment. We show that a...

This paper discusses the macroeconomic effects of China's informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy...

Since the beginning of the financial crisis, a lively debate has emerged regarding which monetary policy rule the Fed (and other central banks) should follow, if any. To clarify this debate, several questions must be answered. Which monetary policy rule best the historical data? Which monetary...

In the last few years, macroeconomic modelling has emphasised the role of credit market frictions in magnifying and transmitting nominal and real disturbances and their implication for macro-prudential policy design. In this paper, we construct a modest New Keynesian general equilibrium model...

This paper jointly examines the link between competition and expected returns in the time series and in the cross section. To this end, we build a general equilibrium model where markups vary because of firm entry with oligopolistic competition. When concentration is high, markups are more...