During financial turmoil, increases in risk lead to higher default, foreclosure, and fire sales. This paper introduces a costly liquidation process for foreclosed collateral and pro-cyclical recovery rates in a dynamic stochastic general equilibrium model of the financial accelerator. Links...

Extremely low inflation rates have moved to the forefront of monetary policy discussions. In Asia, a number of countries—most prominently Japan, but also Taiwan and China—have actually experienced deflation over the last fifteen years. Monetary Policy with Very Low Inflation in the Pacific...