This paper explores the effect of news shocks on the current account and other macroeconomic variables using worldwide giant oil discoveries as a directly observable measure of news shocks about future output - the delay between a discovery and production is on average 4 to 6 years.  We first...

Microfounded macromodels (SDGE models) represent the dominant approach in academic macroeconomics, and their influence now extends to the forecasting models of central banks.  These models appear to adopt a clear methodological approach, which promotes internal consistency above external...

Models of macroeconomic learning are populated by agents who possess a great deal of knowledge of the "true" structure of the economy, and yet ignore the impact of their own learning on that structure; they may learn about an equilibrium, but they do not learn within it.  An alternative learning...

Saddlepath learning occurs when agents learn adaptively using a perceived law of motion that has the same form as the saddlepath relationship in rational expectations equilibrium.  Under saddlepath learning, we obtain a completely general relationship between determinacy and e-stability, and...

The objective of this paper is to propose a model to assess risk for banks. Its main innovation is to incorporate endogenous interaction between banks, recognising that the actual risk to which an individual bank is exposed also depends on its interaction with other banks and other private...

The purpose of our work is to explore contagious financial crises. To this end, we use simplified, thus numerically solvable, versions of our general model [Goodhart, Sunirand and Tsomocos (2003)]. The model incorporates heterogeneous agents, banks and endogenous default, thus allowing various...

This paper proposes a measure of financial fragility that is based on economic welfare in a general equilibrium model calibrated against UK data. The model comprises a household sector, three active heterogeneous banks, a central bank/regulator, incomplete markets, and endogenous default. We...

As financial stability has gained focus in economic policymaking, the demand for analyses of financial stability and the consequences of economic policy has increased. Alternative macroeconomic models are available for policy analyses, and this paper evaluates the usefulness of some models from...

This paper first extends the canonical General Equilibrium with Incomplete Markets (GEI) model with money and default to allow for competitive banking and financial instability. Second, it introduces capital requirements for the banking sector to assess the short and medium term macroeconomic...

This paper contains a General Equilibrium model of an economy with Incomplete Markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a Central Bank, a government and a regulator. The model is used to analyse...