"We analyze financial collapses, such as the one that occurred during the U.S. Great Depression, from the perspective of a monetary model with multiple equilibria.The multiplicity arises from the presence of a strategic complementarity due to increasing returns to scale in the intermediation...

We provide a novel methodology for estimating time-varying weights in linear prediction pools, which we call dynamic pools, and use it to investigate the relative forecasting performance of dynamic stochastic general equilibrium (DSGE) models, with and without financial frictions, for output...