This paper argues that the lack of timely and decisive policy action to correct domestic and external imbalances contributed crucially to the build-up of financial excesses that led to the financial crisis and the Great Recession. We focus on 2002-07 and perform a number of counterfactual...

We review the recent literature on macroprudential policy and its interaction with other policies, extracting several points. First, there are externalities in the financial sector, often in the form of excessive credit growth. Second, monetary policy needs to take financial stability into...

Starting from Simon's bounded rationality notion, in this study we consider some of the links between concepts of bounded rationality and the approaches followed by economists in their analysis of the role played by economic agents' expectations in driving the evolution of the economy through...