This paper examines the roles of bank capital regulation and monetary policy in mitigating procyclicality and promoting macroeconomic and financial stability. The analysis is based on a dynamic stochastic model with imperfect credit markets. Macroeconomic (financial) stability is defined in...

Incorporating survey forecasts to a forecast-augmented Hodrick-Prescott filter, we evidence a considerable improvement to the reliability of US output-gap estimation in realtime. Odds of extracting wrong signals of output-gap estimates are found to reduce by almost a half, and the magnitude of...

In a linear stochastic forward-looking univariate model with predetermined variables, we consider the possibility of heterogeneous equilibria with sunspots emerging endogenously through adaptive learning and replicator dynamics. In particular, we investigate equilibria where only a fraction of...