The global financial crisis of 2008 was a crisis affecting both the financial sector and the “real economy”. This paper analyzes the transmission of unexpected shocks from the financial sector in the US to other countries and sectors. We test the hypothesis that the financial crisis spread...

Regional differences in banking integration determined how Japan's Great Recession after 1990 spread across the country. We explain these differences with the emergence of silk reeling as the main export industry after Japan's opening to trade in the 19th century. The silk-exporting prefectures...

A new test for financial market contagion based on changes in extremal dependence defined as co-kurtosis and co-volatility is developed to identify the propagation mechanism of shocks across international financial markets. The proposed approach captures changes in various aspects of the asset...

We examine the role of bank leverage to explain why the 2007-08 financial crisis unfolded at a time when the economy appears to be less fragile to crisis risks. To this end, we extend the model introduced by Diamond and Rajan (2012) to a variant where the probability of financial crises varies...

This paper estimates a two-country model with a global bank, using US and Euro Area (EA) data, and Bayesian methods. The estimated model matches key US and EA business cycle statistics. Empirically, a model version with a bank capital requirement outperforms a structure without such a...

The global economic recovery is on course but remains weak. Many analysts and policymakers - including those from emerging markets - have recently called for international cooperation in the setting of macroeconomic policies. A global growth target has been adopted by the G20 to aid such...

Uzawa (1968) first introduced a simple and appealing method for reducing problems with variable rates of time preference to single-state systems by transforming the time scale from t to ., a utility discount factor. This transformation has been used extensively, particularly in models of...

Recent literature has focuses on realized volatility models to predict financial risk. This paper studies the benefit of explicitly modeling jumps in this class of models for value at risk (VaR) prediction. Several popular realized volatility models are compared in terms of their VaR forecasting...

Recent studies document the deteriorating performance of forecasting models during the Great Moderation, which conversely implies that forecastability was higher in the preceding era when the economy was unexpectedly volatile. We explain this phenomenon in the context of equilibrium...

Central to the conduct of monetary policy are inflation forecasts. Inflation forecast are not unique. Central banks and professional organizations generate inflation forecasts while households are surveyed about their inflation outlook. This paper estimates inflation forecast disagreement for...