Recent financial turmoil and existing empirical evidence suggest that adverse shocks to the financial intermediary (FI) sector cause substantial economic downturns. The quantitative significance of these shocks to the U.S. business cycle, however, has not received much attention up to now. To...

In this paper, we first set up a model that incorporates firm dynamics into the Global Economy Model (henceforth, GEM) developed by the IMF Research Department. Then, we show how the economic variables respond to the shocks that shift the production frontier outwards, namely productivity gains...

Using a newly-constructed panel data set which includes annual estimates of lending rates for 47 Japanese prefectures, we analyze why interest rates converged over the period 1884-1925. We find evidence that technological innovations and institutional changes played an important role in creating...

The paper identifies and evaluates consequences for monetary policy of five features of East Asian development: export orientation, integrated regional trade, bank-dependent finance, the potential for persistent trade surpluses, and the aggressive accumulation of international reserves. The case...

We examine the expectational stability (E-stability) of the rational expectations equilibrium (REE) in a simple New Keynesian model in which private agents engage in adaptive learning by referring to the central bank's forecast. In this environment, to satisfy the E-stability condition, the...

Focusing on policy-making under uncertainty, we analyze the Bank of Japanfs monetary policy in the early 1990s when the bubble economy collapsed. Conducting stochastic simulations with a large-scale macroeconomic model of the Japanese economy, we find that the BOJfs monetary policy at that time...

In this study, we investigate how central bank transparency about views on future productivity growth influences social welfare. To this end, we use a New Keynesian framework in which both the central bank and private agents are engaged in filtering problems regarding the persistence of...

The co-movement of output across the sector producing non- durables (that is, non-durable goods and services) and the sector producing durables is well-established in the monetary business-cycle literature. However, standard sticky-price models that incorporate sectoral heterogeneity in price...

A central result in international macroeconomics is that a government cannot simultaneously opt for open financial markets, fixed exchange rates, and monetary autonomy; rather, it is constrained to choosing no more than two of these three. In the wake of the Great Recession, however, there has...

It is well known that the concept of "determinacy"-a single stable solution-plays a major role in contemporary monetary policy analysis. But while determinacy is desirable, other things equal, it is not necessary for a solution to be plausible and is not sufficient for a solution to be...