This article examines the influence of debt on the behaviour of households and firms in the recent recession. It compares the levels of debt in the two sectors in recent years, and the sectors’ reactions to indebtedness. It then considers each sector in turn. Debt was more unevenly spread...

Distinguishing between risk and uncertainty, this paper draws on the psychological literature on heuristics to consider whether and when simpler approaches may out-perform more complex methods for modelling and regulating the financial system. We find that: (i) simple methods can sometimes...

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