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This article examines what market conditions lead to extreme losses in global financial systems. Using a reverse stress testing approach, it introduces two measures of systemic risk by starting from the tail losses and working backward to identify the events most closely associated with them.

We study the interaction between epidemics and economic decisions in a model that has silent transmission of the virus. We find that rational behaviour strongly diminishes the severity of the epidemic but worsens the economic recession. We also find that the detection and isolation of not only symptomatic individuals but also those who are infected and asymptomatic or mildly symptomatic can reduce the severity of the recession caused by the pandemic.

Standard monetary models adopt an infinite horizon with discounting. Testing these models in the lab requires implementing this horizon within a limited time frame. We compare three approaches to such an implementation and discuss their relative advantages.

This paper attempts to identify the trend unemployment rate, an empirical concept, using cointegration theory. The authors examine whether there is a cointegrating relationship between the observed unemployment rate and various structural factors, focussing neither on the non-accelerating-inflation rate of unemployment (NAIRU) nor on the natural rate of unemployment, but rather on the trend unemployment rate, which they define in terms of cointegration.

This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms.

The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States.

Models with default options are hard to solve. We propose an extension of the endogenous grid method that solves default risk models more efficiently and accurately.

We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation.

This paper develops a multi-sector New Keynesian model of a small open economy that includes commodity, manufacturing, non-tradable, and import sectors. Price and wage rigidities are sector specific, modelled à la Calvo-Yun style contracts.

Historical narratives typically associate financial crises with credit expansions and asset price misalignments. The question is whether some combination of measures of credit and asset prices can be used to predict these events.