This paper evaluates the performance of optimal simple policy rules in the presence of news shocks. It is shown that the inclusion of forward-looking elements enhances the performance of simple optimized interest rate rules when agents learn about future disturbances in advance. We provide a...

This paper shows that news shocks amplify macroeconomic volatility in any purely forward-looking model, whereas results are ambiguous when including a backward-looking component. We also investigate numerically the volatility effects of news shocks within the Smets and Wouters (2003) model.

A recent theoretical literature highlights the role of endogenous firm entry as an internal amplification mechanism of business cycle fluctuations. The amplification mechanism works through the competition and the variety effect. This paper tests the significance of this amplification mechanism,...

We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using the model of Angeloni and Faia (2010), that combines a standard DSGE framework with a fragile banking sector, suitably modified and calibrated for the euro area. Credibly announced and fast fiscal...

We study alternative scenarios for exiting the post-crisis fiscal and monetary accommodation using the model of Angeloni and Faia (2010), that combines a standard DSGE framework with a fragile banking sector, suitably modified and calibrated for the euro area. Credibly announced and fast fiscal...

This paper explores different fiscal stimuli within a business cycle model with an endogenous mass of firms which we estimate for the U.S. economy using Bayesian techniques. We demonstrate that a changing mass of firms is a crucial dimension for evaluating fiscal policy since it can both...