| Summary: | <p>This thesis inserts a household preference over bond maturities into a costly state
verification financial accelerator model based on Christiano, Motto, and Rostagno’s
2014 AER paper . It is thus building both on the branch of the financial frictions
literature that originated with Bernanke, Gertler, and Gilchrist’s 1999 paper, and
more recent post-crisis attempts to study the macroeconomic affects of quantitative
easing programs within the DSGE framework. It uses a sufficiently large ‘risk shock’
a la Christiano et al. (2014) to introduce a crisis. And then introduces a lagged
shock to the outstanding quantity of long term bonds and lagged monetary policy
shocks calibrated to match the first round of the Federal Reserve’s Large Scale Asset
Purchases (LSAPs) and accompanying constraints on the short rate. The results
of this simulation show that in the model QE first reduces investment, which then
later amplifies the post-crisis stock market boom.</p>
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