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In this paper we present a simple framework to model central bank forward guidance in a liquidity trap. We analyze the … role of long-run and short-run price stickiness under discretion and commitment in a straightforward and intuitive way … when a commitment to hold nominal rates at zero for an extended period is optimal. We then introduce government spending …
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The financial crisis has prompted macroeconomists to think of new policy instruments that could help ensure financial stability. Policymakers are interested in understanding how these should be set in conjunction with monetary policy. We contribute to this debate by analyzing how monetary and...
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We develop a two-country DSGE model with global banks to analyze the role of crossborder banking flows on the transmission of a quality of capital shock in the United States to emerging market economies (EMEs). Banks face a moral hazard problem for borrowing from households. EME's banks might be...
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