This paper compares the impact of shocks to U.S. interest rates and emerging market bond spreads on domestic interest rates and exchange rates across several emerging market economies with different exchange rate regimes. Consistent with conventional priors, the results indicate that interest...

This article surveys the macroeconomic implications of financial frictions. Financial frictions lead to persistence and when combined with illiquidity to non-linear amplification effects. Risk is endogenous and liquidity spirals cause financial instability. Increasing margins further restrict...

This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-markets economy with wage rigidity. Monetary policy sets policy rates and alters the supply of reserves. These tools grant independent control over credit spreads and an interest...

A theory of money needs a proper place for financial intermediaries. Intermediaries diversify risks and create inside money. In downturns, micro-prudent intermediaries shrink their lending activity, fire-sell assets and supply less inside money, exactly when money demand rises. The resulting...

This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-markets economy with wage rigidity. Monetary policy sets policy rates and alters the supply of reserves. These tools grant independent control over credit spreads and an interest...