This paper compares monetary policy in the US and EMU during the last decade, employing an estimated hybrid New Keynesian cash-in-advance model, driven by five shocks. It appears that the difference between the two monetary policies between 1998 and 2006 is due to both surprises in productivity...

This paper analyzes dynamic equilibrium risk sharing contracts between profit-maximizing intermediaries and a large pool of ex-ante identical agents that face idiosyncratic income uncertainty that makes them heterogeneous ex-post. In any given period, after having observed her income, the agent...

In 2001, the Fed has lowered interest rates in a series of cuts, starting from 6.5 per cent at the end of 2000 to 2.0 per cent by early November. This paper asks, whether the Federal Reserve Bank has been surprising the markets, taking as given the conventional view about the effect of monetary...

We use a stylised model to analyse the Stability and Growth Pact for countries that have formed the European Monetary Union (EMU). In our model, shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully. Therefore, while governments...

Many asset pricing puzzles can be explained when habit formation is added to standard preferences. We show that utility functions with a habit then gives rise to a puzzle of consumption volatility in place of the asset pricing puzzles when agents can choose consumption and labor optimally in...

This Paper studies how the HP-Filter should be adjusted, when changing the frequency of observations. It complements the results of Baxter and King (1999) with an analytical analysis, demonstrating that the filter parameter should be adjusted by multiplying it with the fourth power of the...