Understanding the transmission channels of shocks is critical for successful policy response. This paper develops a dynamic general equilibrium model to assess the relative importance of the interest rate, the exchange rate and the credit channels in transmitting shocks in an open economy. The...

In his presidential address to the American Economic Association, Robert Lucas claimed that the welfare costs of the business cycle in the United States equaled .05 percent of consumption. His calculation compared the utility of a representative consumer receiving actual per-capita consumption...

Recent empirical evidence based on microdata panels indicates the importance of banks' balance sheets for the monetary transmission mechanism. This paper builds a dynamic general equilibrium model to analyse the macroeconomic consequences of changes in the cost of bank capital, and thus the cost...

The Federal Reserve System or the Fed is one of the most prestigious institutions in the world. Founded by the Federal Reserve Act in 1913, the Fed has the responsibility of setting the monetary policy of the U.S. The Fed’s actions affect the money supply in the U.S. market which has a direct...

I discuss the identifiability of a structural New Keynesian Phillips curve when it is embedded in a small scale dynamic stochastic general equilibrium model. Identification problems emerge because not all the structural parameters are recoverable from the semi-structural ones and because the...

Over the past 15 years there has been remarkable progress in the specification and estimation of dynamic stochastic general equilibrium (DSGE) models. Central banks in developed and emerging market economies have become increasingly interested in their usefulness for policy analysis and...

Political economists debate the existence of a political business cycle (PBCs), in which politicians stimulate the economy to improve their re-election chances, only to cause a post-election slowdown. For developing countries, scholars have found evidence of election-year policy tinkering. Yet...

In a dynamic, three-region environmental multi-sector general equilibrium model (called EMuSe), we find that carbon pricing generates a recession initially as production costs rise. Benefits from lower emissions damage materialize only in the medium to long run. A border adjustment mechanism...

This paper studies the process that led to the Argentine crisis. The crisis is understood as a major disappointment of previous expectations, indicated by widespread insolvencies and abrupt declines in consumption. The analysis concentrates on the sequence of public and private decisions, and...

This article assesses economic growth in the context of consumer saturation. We show that consumer based economies tend to suffer from demand saturation after an initial and prolonged period of growth. However, structural demand saturation irrevocably triggers a Minsky-type super cycle that is...