The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...

The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a...

We show that the interplay between endogenous limited participation and credit lines creates asset price bubbles in a simple exchange economy with three types of agents: regular stockholders, arbitrageurs and liquidity providers. Regular stockholders are worse off in the economy with credit...

This paper analyzes the optimal monetary policy in a model with a public sector when firms choose prices under incomplete information, and the government can not observe the current state perfectly. We accommodate the notion of Odyssean forward guidance in a framework with a public sector. The...

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

We construct a general equilibrium model of an open economy and develop a computational technique for deriving a market-clearing solution to the model. The model allows for disaggregated commodities, taxes, and tariffs. It includes a government that is an active participant in the economy as a...

Transaction cost shocks in financial markets are known to affect asset prices. This paper analyses how changes in transaction costs may affect the value of assets that banks use to collateralise borrowings in monetary policy operations. Based on a simple asset pricing model and employing a...

This paper is about the effectiveness of qualitative easing, a form of unconventional monetary policy that changes the risk composition of the central bank balance sheet with the goal of stabilizing economic activity. We construct a general equilibrium model where agents have rational...

Recent empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on stock prices: a 25-basis point increase in the Fed funds rate is associated with an immediate decrease in broad stock indices that may range from 0.5 to 2.3 percent, followed...