Financial markets are to a very large extent influenced by the advent of information. Such disclosures, however, do not only contain information about fundamentals underlying the markets, but they also serve as a focal point for the beliefs of market participants. This dual role of information...

We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...

We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...

We show that the size of collateralized household debt determines an economy's vulnerability to crises of confidence. The house price feeds back on itself by contributing to a liquidity effect, which operates through the value of housing in a collateral constraint. Over a specific range of debt...

This paper develops a notion of consumer confidence within a dynamic competitive equilibrium framework. In any situation where multiple equilibrium prices on next‐period spot markets are equally supported by the state of the economy, confidence is encoded in the subjective probabilities...

Crises are triggered by the inherent uncertainty of the capitalist system. We represent this uncertainty in an open economy real business cycle model of the UK by including non-stationary productivity shocks. A random sequence of good or bad shocks will accumulate, producing euphorias and...

We hope to model financial fragility and money in a way that captures much of what is crucial in Hyman Minsky’s financial fragility hypothesis. This approach to modeling Minsky may be unique in the formal Minskyan literature. Namely, we adopt a model in which a psychological variable we call...

It has been argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession, and that models in which inflation depends on economic slack cannot explain the recent muted behavior of inflation, given the...

This paper assesses the OECD’s projections for GDP growth and inflation during the global financial crisis and recovery, focussing on lessons that can be learned. The projections repeatedly over-estimated growth, failing to anticipate the extent of the slowdown and later the weak pace of the...

This paper reconsiders the role of macroeconomic shocks and policies in determining the Great Recession and the subsequent recovery in the US. The Great Recession was mainly caused by a large demand shock and by the ZLB on the interest rate policy. In contrast with previous findings, the...