In this paper we aim to trace the roots of the ongoing economic mayhem and to unmask the chorus of the tragedy which plays on the world stage. The main thesis of our work is that, despite the triumphant rhetoric praising the merits of perfect competition, the global fields of the dysfunctional...

Economic growth is propelled in part by the accumulation of different kinds of capital, including social capital in its several guises. This paper considers the interplay between financial crises and various aspects of social capital which, if it is allowed to depreciate, can undermine economic...

Can central banks defuse rising stability risks in financial booms by leaning against the wind with higher interest rates? This paper studies the state-dependent effects of monetary policy on financial stability. Based on the near-universe of advanced economy financial cycles since the 19th...

We develop a model of rational bubbles based on leverage and the assumption of an imprecisely known maximum market size. In a bubble, traders push the asset price above its fundamental value in a dynamic way, driven by rational expectations about future price developments. At a previously...

This paper studies the long-run effects of credit market disruptions on real firm outcomes and how these effects depend on nominal wage rigidities at the firm level. I trace out the long-run investment and growth trajectories of firms which are more adversely affected by a transitory shock to...

This study develops a stylised DSGE model, that departs in one aspect: it replaces the general equilibrium approach by disequilibrium economics. In this way, richer macroeconomic adjustment dynamics result, as it is not necessary to assume that goods and labour markets continuously clear. The...

Europe's debt crisis casts doubt on the effectiveness of fiscal austerity in highly-integrated economies. Closed-economy models overestimate its effectiveness, because they underestimate tax-base elasticities and ignore cross-country tax externalities. In contrast, we study tax responses to debt...

We examine forecast accuracy and efficiency of the Social Security Administration's projections for cost rate, trust fund balance, trust fund ratio made during 1980-2020 with horizons up to 95 years. We find that the reported deterioration in the accuracy of the forecasts during 2010’s has...

In recent years there has been increasing concern about the identification of parameters in dynamic stochastic general equilibrium (DSGE) models. Given the structure of DSGE models it may be difficult to determine whether a parameter is identified. For the researcher using Bayesian methods, a...