Latest documents http://publikationen.ub.uni-frankfurt.de/index/index/ Wed, 11 Jul 2012 16:19:27 +0100 Wed, 11 Jul 2012 16:19:27 +0100 http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/26869 Motivated by the U.S. events of the 2000s, we address whether a too low for too long interest rate policy may generate a boom-bust cycle. We simulate anticipated and unanticipated monetary policies in state-of-the-art DSGE models and in a model with bond financing via a shadow banking system, in which the bond spread is calibrated for normal and optimistic times. Our results suggest that the U.S. boom-bust was caused by the combination of (i) too low for too long interest rates, (ii) excessive optimism and (iii) a failure of agents to anticipate the extent of the abnormally favorable conditions. Fabio Verona; Manuel M. F. Martins; Inês Drumond workingpaper http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/26869 Wed, 07 Nov 2012 16:19:27 +0100