This paper examines to what extent the build-up of global imbalances since the mid-1990s can be explained in a purely real open-economy DSGE model in which agents' perceptions of long-run growth are based on filtering observed changes in productivity. We show that long-run growth estimates based...

The paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either price stability or as price stability and sustainable output or employment growth. Financial...

This paper outlines important lessons for monetary policy. In particular, the role of inflation targeting, which was much acclaimed prior to the financial crisis and since then has not lost much of its endorsement, is critically reviewed. Ignoring the relation between monetary policy and asset...

The recent financial crisis has shown that financial innovation can have devastating systemic impacts. International standard setters’ and national regulators’ response has been a global concerted effort to overhaul and tighten financial regulations....

The recent financial crisis has shown that financial innovation can have devastating systemic impacts. International standard setters’ and national regulators’ response has been a global concerted effort to overhaul and tighten financial regulations....

The recent crisis underlined that proper estimation of distress-dependence amongst banks in a global system is essential for financial stability assessment. We present a set of banking stability measures embedding banks’ linear (correlation) and nonlinear distress-dependence, and their changes...

This paper develops a general-equilibrium model of skill-biased technological change that approximates the observed shifts in the shares of wage and non-wage income going to the top decile of U.S. households since 1980. Under realistic assumptions, we find that all agents can benefit from the...

We develop a general equilibrium model with nancial frictions in which internal capital (equity capital) and external capital (bank loans) have different rates of return. Financial development raises the rate of return on external capital but has a non-monotonic effect on the rate of return on...

We develop a model of a small open economy with credit market frictions to analyze the consequences of capital account liberalization. We show that financial opening facilitates the inflows of cheap foreign funds and improves production efficiency. Reforms increasing labor market flexibility can...

Jim Tobin, who died on March 11, 2002 at the age of 84, was one of giants of economics of the second half of the twentieth century and the greatest macroeconomist of his generation. Tobin’s influence on macroeconomic theory is so pervasive - so much part of our professional ‘acquis’ - that...