In this paper block Kalman filters for Dynamic Stochastic General Equilibrium models are presented and evaluated. Our approach is based on the simple idea of writing down the Kalman filter recursions on block form and appropriately sequencing the operations of the prediction step of the...

We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher...

We propose a model in which unemployed people satisfy three conditions: (i) they are making efforts to find work, (ii) they are ready and able to work and (iii) they would be better off if they find a job than if they do not. A person who satisfies (i) and (ii) meets the US Bureau of Labor...

How important are financial and labor market frictions for the business cycle dynamics of a small open economy? What are the quantitative effects of increased financial risk on output and inflation? How important are variations in the intensive vs. the extensive margin of labor supply? What are...

How do aggregate quantities at the business cycle frequency respond to shocks to the spread between residential mortgage rates and government bonds? Using a structural VAR approach, we find that mortgage spread shocks impact the real economy by both economically and statistically significant...

In this paper, we quantify the effects of the recent increase in the housing loan-to-value ratio (LTV) on the monetary transmission mechanism. We set up a two-sector dynamic stochastic general equilibrium model with collateral constraints and production of goods and housing. Using Bayesian...

We explore shocks to expected future productivity in a model with limited enforcement of financial contracts. A microfounded collateral constraint implies that good news about future productivity yield an increase in stock prices, available credit and a general economic expansion.

How do aggregate quantities at the business cycle frequency respond to shocks to the spread between residential mortgage rates and government bonds? Using a structural VAR approach, we find that mortgage spread shocks impact the real economy by both economically and statistically significant...

We explore the implications of shocks to expected future productivity. In a setting with limited enforcement of financial contracts, firms have to post collateral to obtain external finance. In a real one-sector model with this type of "collateral constraint", positive news about future...

We develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher...