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Federal Reserve Bank of St. Louis Economic Synopses 2022-26
- Two years into COVID, what’s the state of U.S. businesses?
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- The Credit Line Channel
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- Are Banks Exposed to Interest Rate Risk?
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- Historical Patterns around Financial Crises
Federal Reserve Bank of San Francisco Economic Letter 2020-10
- Monetary policy under the microscope: Household heterogeneity and consumption
VoxEU Column, March 2020
- Does the Fed know more about the Economy?
Federal Reserve Bank of San Francisco Economic Letter 2019-11
- Modeling Financial Crises
Federal Reserve Bank of San Francisco Economic Letter 2019-08
- Monetary Policy Cycles and Financial Stability
Federal Reserve Bank of San Francisco Economic Letter 2018-06
- Monetary Policy and the Labor Market: A Quasi-Experiment in Sweden
by J. Coglianese, M. Olsson & C. Patterson, 2021 NBER Monetary Economics
- Credit Allocation and Macroeconomic Fluctuations
by K. Mueller & E. Verner, 2021 Central Bank of Ireland Workshop
- Liquidity Insurance vs. Credit Provision: Evidence from the Covid-19 Crisis
by T. Kapan & C. Minoiu, 2020 CEAR/GSU Financial Stability and the Coronavirus Pandemic
- Q-Monetary Transmission
by P. Jeenas and R. Lagos, 2020 Barcelona GSE Research Webinar
- The Welfare Effects of Bank Liquidity and Capital Requirements
by S. van den Heuvel, 2019 Fed Day-Ahead Conference
- Measuring the Effects of Fed FG and AP on Financial Markets
by E. Swanson, 2017 California Macro Conference
- Income Inequality, Financial Crises, and Monetary Policy
by I. Cairo and J. Sim, 2017 Fed Macro System Committee Meeting
This paper develops a dynamic general equilibrium model which includes financial intermediation and endogenous financial crises. Consistent with the data, financial crises occur out of prolonged (credit) boom periods and are initiated by a moderate adverse shock. The mechanism which gives rise to boom-bust episodes around financial crises is based on an interaction between the maturity mismatch of the financial sector and an agency problem which results in procyclical lending. I show how to model these features in a tractable way, giving a realistic representation of the financial sector’s balance sheet and its lending behavior. The paper provides empirical evidence on the behavior of the U.S. financial sector’s market leverage which is (i) acyclical, (ii) rose mildly prior to the Great Recession, and (iii) increased sharply during the crisis; the model is consistent with these empirical facts. It also predicts and replicates the Great Recession, when confronted with a historical series of structural shocks. Finally, the framework is extended to include price rigidities, nominal debt contracts, and monetary policy. Within this version, I analyze the impact of monetary policy on financial stability and show that a U-shaped pattern of the policy target rate is most likely to increase financial instability.