Financial intermediaries issue the majority of liquid securities, and nonfinancial firms have become net savers, holding intermediaries' debt as cash. This paper shows that intermediaries' liquidity creation stimulates growth -- firms hold their debt for unhedgeable investment needs -- but also...

This paper argues that in a homogeneous monetary Real Business Cycle economy where a complete set of nominal contingent claims exist, the requirement to collateralize loans, alone, does not affect the equilibrium allocation when monetary policy is chosen optimally: the Pareto optimal allocation...

Spanish Abstract: El presente artículo presenta un modelo sencillo de acelerador financiero, en el que a partir de la solución del problema de optimización intertemporal del flujo de renta del empresario en condiciones de competencia monopolística, es posible evaluar el impacto de dichos...

This paper studies a dynamic general equilibrium model with sticky prices and rational expectations in an environment of low interest rates and deflationary pressures. We show that small changes in the public's beliefs about the future inflation target of the government can lead to large swings...

Some key structural features of the U.S. economy appear to have changed in the recent decades, making the conduct of monetary policy more challenging. In particular, there is high uncertainty about the levels of the natural rate of interest and unemployment as well as about the effect of...

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...

This paper presents DSGE Nash, a toolkit to solve for pure strategy Nash equilibria of global games in general equilibrium macroeconomic models. Although primarily designed to solve for Nash equilibria in DSGE models, the toolkit encompasses a broad range of options including solutions up to the...

We analyze the macroeconomic implications of a transient interest-rate peg in combination with a QE program in a non-linear medium-scale DSGE model. In this context, we re-examine what has become known as the reversal puzzle (Carlstrom, Fuerst and Paustian, 2015) and provide an analytical...

The presence of the lagged shadow policy rate in the interest rate feedback rule reduces the government spending multiplier nontrivially when the policy rate is constrained at the zero lower bound (ZLB). In the economy with policy inertia, increased inflation and output due to higher government...

How to conduct macro-prudential regulation? How to coordinate monetary policy and macro-prudential policy? To address these questions, I develop a continuous-time New Keynesian economy in which a financial intermediary sector is subject to a leverage constraint. Coordination between monetary and...