It is high time we rediscovered the role of the financial cycle in macroeconomics. In the environment that has prevailed for at least three decades now, it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the...

Five years after the financial crisis, the global economy remains unbalanced and many of the advanced countries are still struggling to return to robust, sustainable growth. Taking a historical perspective, I argue that this predicament reflects a failure to adjust to profound changes in the...

The objective of this Discussion Paper is to develop a methodology for Latvian FSI. To this effect, the particular methodologies widely used in international practice for composite indicators applied in financial stability monitoring and the experience of selected countries were examined. The...

The objective of this paper is to develop a methodology for the Latvian financial stress index (FSI). To this effect, the particular methodologies widely used in international practice for composite indicators applied in financial stability monitoring and the experience of selected countries...

We investigate the comovement between sovereign and bank credit riskin the Euro area over the period 2008-2010. We construct two synthetic credit risk measures of the European sovereign and banking sectors thatcan be used for macro-prudential supervision. We estimate a Vector error-correction...

We employ a model of leverage-induced explosive behavior in financial markets to develop a measure of financial market instability. Specifically, we derive a quantitative condition for how large levered investors can become relative to the whole market before the demand curve for securities...