Lectures at the Czech National Bank, February 8, 9.


Introducing Financial Frictions into the New Keynesian Model


          Lecture handouts:


Introduction and Background.


The ‘Consensus’ New Keynesian model.


Microfoundations for the Costly State Verification (CSV) Approach to Financial Frictions.


Introducing CSV into the Consensus New Keynesian model.


Introducing CSV into Small Open Economy Model.




Bernanke, Gertler and Gilchrist’s classic 1999 paper.

Christiano, Motto, Rostagno (2003): Using the BGG model to analyze the cause of the US Great Depression, and the reason it lasted so long.

Christiano, Motto, Rostagno (2009): Using the BGG model to understand the causes of economic fluctuations in the EA and the US.

Christiano, Trabandt and Walentin (2009): Financial and labor market frictions in a small open economy model of Sweden. (Handout for financial frictions in a simpler setting than the one in CTW.)