We document the twin crisis that affected Spain in the mid-1860s. First, we trace back its origins to the international crisis of 1864-66. Next, we describe the particular banking sector of Spain, characterized by the coexistence of the Bank of Spain with multiple local banks of issue. We...

In this paper we study whether policy makers should wait to intervene until a financial crisis strikes or rather act in a preemptive manner. We study this question in a relatively simple dynamic stochastic general equilibrium model in which crises are endogenous events induced by the presence of...

In the aftermath of the global financial crisis, a new policy paradigm has emerged in which old-fashioned policies such as capital controls and other government distortions have become part of the standard policy toolkit (the so-called macro-prudential policies). On the wave of this seemingly...

In the aftermath of the global financial crisis, a new policy paradigm has emerged in which old-fashioned policies such as capital controls and other government distortions have become part of the standard policy tool kit (so called macro- prudential policies). On the wave of this seemingly...

This paper studies whether policymakers should wait to intervene until a financial crisis strikes or rather act in a preemptive manner. This question is examined in a relatively simple dynamic stochastic general equilibrium model in which crises are endogenous events induced by the presence of...

We develop a new model of cycles and crises in emerging markets, featuring an occasionally binding borrowing constraint and stochastic volatility, and estimate it with quarterly data for Mexico since 1981. We propose an endogenous regime‐switching formulation of the occasionally binding...

Stochastic general equilibrium models of small open economies with occasionally binding financial frictions are capable of mimicking both the business cycles and the crisis events associated with the sudden stop in access to credit markets (Mendoza, 2010). This paper studies the inefficiencies...