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...

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...

No, not really. Responding to lingering concerns about the reliability of SVARs, Christiano et al (NBER Macro Annual, 2006, "CEV") propose to combine OLS estimates of a VAR with a spectral estimate of long-run variance. In principle, this could help alleviate specification problems of SVARs in...

We assess quantitatively the effect of exogenous reductions in fertility on output per capita. Our simulation model allows for effects that run through schooling, the size and age structure of the population, capital accumulation, parental time input into child-rearing, and crowding of fixed...

Credit constraints that link a private agent’s debt to market-determined prices embody a credit externality that drives a wedge between competitive and constrained socially optimal equilibria, inducing private agents to overborrow. The externality arises because agents fail to internalize the...

Many economists believe that, while openness to trade increases average GDP growth rates, it also raises output volatility by exposing countries to terms-oftrade shocks. This view does not take into account that, as suggested by a recent strand of the financial fragility literature, commercial...

The paper describes boom-and-bust cycles within Hayek's framework of order and aims to provide an understanding of recurring crises in recent financial history. We argue that a boom-and-bust cycle is initiated by a displacement that lowers the degree of (ex-post) plan coherence (or order) in an...

Why are some financial crises associated with political crises and some are not? Does political instability cause financial fragility or the other way around? What are the implications of political distortions for policy in countries experiencing financial turmoil? This paper studies these and...

The misevaluation of risk in securitized financial products is central to understanding the financial crisis of 2007 - 8. This paper characterizes the evolution of factors affecting collateralized debt obligations based on subprime mortgages. A key feature of subprime-mortgage backed indices is...

I provide a framework for understanding debt deleveraging in a group of _nancially integrated countries. During an episode of international deleveraging world consumption demand is depressed and the world interest rate is low, reecting a high propensity to save. If exchange rates are allowed to...