Using a model with housing search, endogenous credit constraints, and mortgage default, this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross-sectional consumption during the Great Recession. Left tail shocks to labor market uncertainty and...

Cyclical systemic risk arises when macro-financial imbalances accumulate over time. Past financial crises which occurred in several countries around the world have shown that heightened cyclical risk can lead to exorbitant economic and financial costs if the appropriate macroprudential policies...