An increasingly important research agenda in macroeconomics has been to analyze the relationship between the business cycle and the condition of firms' and households' balance sheets. The focus of this research has mainly been to study the way in which exogenous shocks may be amplified through the financial system, whereas the related idea, much entertained by earlier macroeconomic thinking, that the financial system may itself be a source of endogenous volatility has received relatively less attention. On the other hand, having experienced the advances in quantitative business cycle modelling, many macroeconomists as well as policy-makers strongly feel there is an urgent need to incorporate elements from modern financial market research, which emphasizes the implications of, in particular, informational asymmetries, into standard dynamic business cycle models. The financial sector in the latter models is more often than not highly simplified, so that the macroeconomic implications of important questions related to the way agents finance their activities, have access to financial markets and choose their contractual arrangements, cannot be easily analyzed with the help of these models. We encourage research on the relationship between the financial structure and the macroeconomic performance of the economy and invite papers on the macroeconomic implications of credit markets and financial market imperfections. We in particular encourage research on - Credit markets and business cycles - Financial propagation - Endogenous credit cycles and financial dampening - Financial market imperfections and quantitative business cycle modelling.


Papers and presentations

Andrew T. Levin, Fabio Natalucci, Egon Zakrajsek:
The magnitude and cyclical behaviour of credit market frictions
Paper, presentation, discussion

Francisco Covas, Wouter J. den Haan:
The role of debt and equity finance over the business cycle
Paper, presentation

Virginia Queijo:
How important are financial frictions in the U.S. and the euro area?
Paper, presentation, discussion

Guido Lorenzoni, Karl Walentin:
Financial frictions, investment and Tobin's q
Paper, presentation, discussion

Andrea L. Eisfeldt, Adriano A. Rampini:
Managerial incentives, capital reallocation and the business cycle
Paper, presentation, discussion

Tuomas Takalo, Otto Toivanen:
Entrepreneurship, financiership and selection
Paper, presentation, discussion

Giovanni Favara:
Agency costs, net worth and endogenous business fluctuations
Paper, presentation, discussion

Simon Gilchrist, Jae Sim:
Investment during the Korean financial crisis: the role of foreign-denominated debt
Paper, presentation

Vasco Cúrdia:
Monetary policy under sudden stops
Paper, presentation, discussion

Matteo Iacoviello, Stefano Neri:
The role of housing collateral in an estimated two-sector model of the U.S. economy
Paper, presentation, discussion

Simon Gilchrist, Masashi Saito:
Expectations, asset prices and monetary policy: the role of learning
Paper, presentation, discussion

Caterina Mendicino:
Credit market and macroeconomic volatility
Paper, discussion

Fiorella De Fiore, Oreste Tristani:
Credit and the natural rate of interest
Paper, presentation, discussion

Jouko Vilmunen:
What's in it for us?
(policy view)