Optimal interest rate rules, asset prices, and credit frictions
Universitat Pompeu Fabra; IGIER, Universita' Bocconi
New Keynesian DSGE model with Carlstrom-Fuerst agency cost framework featuring endogenous credit frictions, monopolistic competition, Rotemberg sticky prices, and countercyclical external finance premium generated by linking mean distribution o
final goods producers: perfect competition with CES aggregation; intermediate goods producers: monopolistic competition with Rotemberg quadratic price adjustment costs
Table 1 p.3246
TRI with negative asset price response: fp=1.5, fy=0, fq=-0.2