Over-borrowing and financial stress has recently become an important issue in macroeconomic and policy discussions in the US as well as in the EU. In this paper we study two regimes of financial stress. In a regime of high financial stress, stress shocks can have large and persistent impacts on...

Over-borrowing and financial stress has recently become an important issue in macroeconomic and policy discussions in the US as well as in the EU. In this paper the authors study two regimes of financial stress. In a regime of high financial stress, stress shocks can have large and persistent...

In this paper we formulate a baseline disequilibrium AS-AD model and empirically estimate it with time series data for the U.S.-economy. The version of the model used here exhibits a Phillips-curve, a dynamic IS curve and a Taylor interest rate rule. It is based on sticky wages and prices,...