We use an estimated open economy DSGE model with financial frictions for the US and the rest of the world to evaluate various competing explanations about the recent boom-bust cycle. We find that the savings glut hypothesis is insufficient for explaining all aspects of the boom in the US....

This paper uses an estimated DSGE model to analyze the factors behind the buildup of imbalances in the Spanish economy. Shock decompositions suggest that external imbalances have been able to build up mainly due to the reduction in real interest rates and easier access to credit following the...

The paper studies the impact of a securities transaction tax (STT) on financial trading, stock prices and real economic variables in a closed-economy dynamic stochastic general-equilibrium model featuring financial frictions. The model incorporates channels by which 'noise trading' affects real...

Summary for non-specialistsAs a result of the financial crisis, cyclically corrected indicators have taken on a greater degree of significance and are firmly back at the forefront of economic policy making. This heightened level of policy interest not only reflects the anxiousness of policy...

The current crisis revealed the unsustainability of private sector indebtedness levels, fuelled, in the recent past, by a prolonged period of rapid credit expansion in some EU Member States. The deleveraging process that is now taking place, although necessary, stands as a source of concern in...