The liquidity effect, defined as a decrease in nominal interest rates in response to a monetary expansion, is a major stylized fact of the business cycle. This paper seeks to understand under what conditions such an effect can be explained in a general equilibrium model with sticky prices and...

‘The Great Recession’ was preceded by a prolonged period of high growth accompanied by low and stable inflation, the so called ‘Great Moderation’. During that period, potential growth estimates were trending upwards and output gaps remained small. However, other imbalances were...

This paper "tests" the performance of the approaches of Watson (1993), DeJong, Ingram and Whiteman (1996), Canova and De Nicolo (1995) and Ortega (1998) for evaluating stochastic dynamic general equilibrium models using Monte Carlo techniques. It asks: Do different model evaluation methodologies...

In this paper we construct a dynamic stochastic general equilibrium model for a small open economy allowing for perfect capital mobility. The model incorporates price rigidities in monopolistically competitive goods and labor markets and real rigidities in the form of capital adjustment costs....

This paper provides a set of stylised facts on the mechanisms through which banking and sovereign distress feed into each other, using a large sample of emerging economies over three decades. We first define “twin crises” as events where banking crises and sovereign defaults combine, and...

During the last crisis, developed economies’ sovereign Credit Default Swap (hereafter CDS) premia have gained in importance as a tool for approximating credit risk. In this paper, we fit a dynamic factor model to decompose the sovereign CDS spreads of ten OECD economies into three components:...

We examine the effect of the short-selling ban in 2011 on Spanish stocks on the level of risk in the banking sector. Before the ban, short positions were found to be positive and significantly related to the creditworthiness of medium-sized banks, these being generally less internationally...

Realized volatilities, when observed over time, share the following stylised facts: comovements, clustering, long-memory, dynamic volatility, skewness and heavy-tails. We propose a dynamic factor model that captures these stylised facts and that can be applied to vast panels of volatilities as...

The economic crisis affecting the industrialised countries in recent years has been singular given its intensity, complexity and the difficulties in overcoming it. The aim of this paper is to analyse the determinants behind the crisis that have made it deeper and longer in Spain than in previous...

This paper briefl y describes some features of the situation of the Spanish economy after five years of crisis, a task which is easier now that this period can be analysed from a certain perspective. The crisis prompted a substantial readjustment of the main Spanish macroeconomic aggregates,...