Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies state-dependent effects of monetary policy on crisis risk. Based near-universe advanced economy cycles since nineteenth century, we show that discretionary policies during credit and asset price are more likely to trigger crises than prevent them. (JEL E4...

I analyze an extension of the New Keynesian model that features overlapping generations finitely lived agents and (stochastic) transitions to inactivity. In contrast with standard model, proposed framework allows for existence rational expectations equilibria asset price bubbles. study conditions under which bubble-driven fluctuations may emerge type monetary policy rules prevent them. conclude...

We analyze the ups and downs in economic growth recent decades by constructing a model with recurrent bubbles, crashes, endogenous growth. Once realized, bubbles crowd investment stimulate growth, but expectation about future crowds out reduces identify bubbly episodes estimating using US data. Counterfactual simulations suggest that IT housing not only caused booms also lifted GDP almost 2 per...

We estimate various SVAR models for the US in order to assess the importance of fundamental shocks in explaining stock price movements. The results show that models using real activity variables place more weight on fundamental shocks than models using dividends or earnings. However, according to all models fundamental shocks became substantially less important during the period 1982-2002 if co...

Included here are two appendices. Appendix A has information on model priors, selected material on the data, and some details on computation. Appendix B contains an extended treatment of alternative measures of stress, and alternative measures of real activity, including how these measures compare to the base case model in terms of picking up the same state probabilities and, in some cases, qua...

Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does type matter? We propose novel SVAR identification strategy address these questions via inequality constraints on structural shocks. find that sharply higher macroeconomic recessions often output shocks, while financial markets likely fluctuations. (JEL D81...

We examine the dynamic effects of TFP news shocks in context frictions financial markets. document two new facts. First, a shock to future generates significant decline credit spread indicators along with robust improvement supply indicators. Second, we establish tight link between and that explain majority un-forecastable movements A DSGE model enriched sector Gertler-Kiyotaki-Karadi type very...

We construct a new 2-parameter family Emn, m, n ≥ 3, of self-dual 2-simple and 2-simplicial 4-polytopes, with flexible geometric realisations. E44 is the 24-cell. For large m, n the f -vectors have “fatness” close to 6. The Et-construction of Paffenholz and Ziegler applied to products of polygons yields cellular spheres with the combinatorial structure of Emn. Here we prove polytopality of thes...

Business credit lags GDP growth by about one year. This contributes to high leverage during recessions and slow deleveraging. We show that a model in which firms use risky long-term debt replicates this adjustment of firm debt. In the model, slow-moving has important effects for real activity. High levels issued expansions are only gradually reduced recessions. generates an adverse feedback loo...