This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s and their changes thereafter. In an otherwise conventional sticky-price model, standard aggregate demand logic is inverted at low enough asset...

In this paper we study the effects and transmission of fiscal policy in a dynamic general equilibrium sticky-price model with non-Ricardian agents, distortionary taxation and a Walrasian labor market. We derive a simple analytical framework for fiscal policy similar to the workhorse 'new...

Recent estimates of the output Euler equation for the United States indicate that the elasticity of aggregate demand to interest rates is not significantly different from zero. We first argue that this result may hide a structural break: the estimated elasticity is a convolution of two...

Using vector autoregressions on U.S. time series for 1957-1979 and 1983-2004, we find government spending shocks to have stronger effects on output, consumption, and wages in the earlier sample. We try to account for this observation within a DSGE model featuring price rigidities and limited...

When enough agents do not participate in asset markets, the slope of the aggregate demand curve is reversed. Monetary policy should be passive, to ensure equilibrium determinacy and to minimize variations in output and inflation. This paper presents evidence that asset markets participation in...

In this paper, we utilise the multi-country version of the NAWM to analyse the impact of globalisation on euro area macroeconomic aggregates. We provide alternative model-based definitions of globalisation associated with an increase in potential output in emerging Asia and its impact on total...

We use a structural VAR with sign restrictions to jointly identify the impact of monetary policy, private absorption, technology and oil price shocks on current account fluctuations in the U.S.. We derive the sign restrictions from theoretical impulse response functions of a DSGE model with oil,...

We use a version of the New Area-Wide Model (NAWM) developed at the ECB in order to quantify the gains from monetary policy cooperation. The model is calibrated in order to match a set of empirical moments. We then derive the cooperative and (open-loop) Nash monetary policies, assuming that the...

In this paper, we examine the macroeconomic effects of alternative fiscal consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model fiscal consolidation as a permanent...

This paper provides evidence for the impact of technology, labor supply, monetary policy and aggregate spending shocks on hours worked in the Euro area. The evidence is based on a vector autoregression identi?ed using sign restrictions that are consistent with both sticky price and real business...