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Program members also study the effects of monetary and fiscal policy on economic performance.
economy as a whole, considering the aggregate behavior of employment, output, and prices with a general focus on the nature of business cycles.
" Ricardo Reis formalizes the notion of a liquidity shortage and then studies the tactical aspects of monetary policy when such a shortage arises.
Impulse and Propagation Mechanisms Group - Lawrence Christiano and Martin Eichenbaum, Leaders Recently, this group has focused on an important area of research stimulated by the financial crisis of 2008: understanding the role of financial market frictions.
Gadi Barlevy in "A Leverage- Based Model of Speculative Bubbles," George-Marios Angeletos and Jennifer La'O (14982), Zheng Liu, Pengfei Wang, and Tao Zha in "Asset Priced Channels and Macroeconomic Fluctuations," and Luca Dedola and Giovanni Lombardo in "Financial Friction, Financial Integration and the International Propagation of Shocks" all study models in which informational frictions give rise to important capital market frictions.
Motivated by recent events as well, other researchers in this group are exploring the efficacy of different policies in economies where a zero bound on the nominal interest rate is binding, and in economies in which the spread on interest rates to borrowers and lenders experiences large changes.
In "Conventional and Unconventional Monetary Policy," Vasco Curdia and Michael Woodford extend the basic New Keynesian model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers.