What is the marginal effect of an increase in the private sector debt-to-GDP ratio on the probability of a banking crisis? This paper shows that the marginal effect of rising debt levels depends on an economy's external position. When the current account is in surplus or in balance, the marginal...

Interventions by the Federal Reserve during the financial crisis of 2007-2009 were generally viewed as unprecedented and in violation of the rules---notably Bagehot’s rule---that a central bank should follow to avoid the time-inconsistency problem and moral hazard. Reviewing the evidence for...

This paper provides a set of stylized 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...

Argentina suffered a depression in the 1980s that was as severe as the Great Depression experienced in the United States and Germany in the interwar period. Our paper examines this depression from the perspective of growth theory, taking total factor productivity as exogenous. The predictions of...

Recessions that are accompanied by financial crises tend to be more severe and are followed by slower recoveries than ordinary recessions. This paper introduces a new Keynesian model with financial frictions on both the demand and supply side of the credit markets that can explain this empirical...

Remarks Before CERAWeek, Houston, Texas, February 9, 2009. ; "Our senators and congressmen and -women must find a way to give our economic engine an activating short-term jolt without encumbering or disincentivizing the entrepreneurial dynamic that has made for the long-term economic miracle...

"As to the Federal Reserve reducing its balance sheet so as not to monetize the excess reserves waiting to be converted to bank loans to the private sector, I have been very clear: Given the lag between the time monetary policy is initiated and when it impacts the economy, that wind-down process...

"I believe I can safely speak for us all when I tell you that the Federal Reserve will continue to explore every avenue and consider every option to see the credit market through the current crisis, consistent with the safety of the System." ; Remarks before the International Institute of...

Remarks before the 125th Annual Convention of the Texas Bankers Association, San Antonio, Texas, May 15, 2009 ; "The most recent reports indicate that job losses may be slowing; trucking companies--a group often looked to as a leading indicator--report a slight pickup in sales; purchasing...

Remarks before the Ninth Annual R.I.S.E. (Redefining Investment Strategy Education) Forum Dayton, Ohio, March 26, 2009 ; "Here is a take-home quote from Charles Mackay's classic tome "Extraordinary Popular Delusions and the Madness of Crowds", written in 1841: 'Men think in herds...[and] they go...