Extending a standard credit-risk model illustrates that a single factor can drive both expected losses and the extent to which they may be exceeded in extreme scenarios, ie "unexpected losses." This leads us to develop a framework for forecasting these losses jointly. In an application to...

A parsimonious extension of a well-known portfolio credit-risk model allows us to study a salient stylized fact - abrupt switches between high- and low-loss phases - from a risk-management perspective. As uncertainty about phase switches increases, expected losses decouple from unexpected...

We find that deep contractions have highly persistent scarring effects, depressing the level of GDP at least a decade hence. Drawing on a panel of 24 advanced and emerging economies from 1970 to the present, we show that these effects are nonlinear and asymmetric: there is no such persistence...

We examine a propagation mechanism that arises from households' long-term borrowing and show empirically that it has sizable real effects. The mechanism recognises that when there is long-term debt, an impulse to new borrowing generates a predictable hump-shaped path of future debt service. We...