In this paper, we set out the JEM (Japanese Economic Model), a large macroeconomic model of the Japanese Economy. Although the JEM is a theoretical model designed with a view to overcoming the Lucas (1976) critique of traditional large macroeconomic models, it can also be used for both...

The reduction of macroeconomic vulnerability in emerging markets is now at the core of the research agenda. Liability dollarization plays a vital role in the understanding of vulnerability and its implications (from a general equilibrium perspective) have been addressed in the literature via the...

This paper presents a generalized two-step maximum likelihood estimation method for partially identified vector autoregressive models. We suggest a likelihood ratio test for over-identification in a sub-system and derive the asymptotics for impulse responses and forecast-error variance...

This paper develops concordance indices for studying the simultaneous occurrence of financial crises across markets and/or countries. The typically low incidence of financial crises necessitates a change in the definition of concordance from those recently developed for the business cycle...

The paper develops a unit-root test that allows for an unknown number of structural breaks with unknown functional forms. The test is based on the fact that the behavior of such series can often be captured using a single frequency component of a Fourier approximation. Hence, instead of...

The research addresses three methodological questions that are central to effective exchange rate and macroeconomic management: what are the determinants and how to model the real exchange rate (RER), how to estimate its equilibrium level, and how to quantify the likely impact of misalignment on...

We examine the role of different explanations for the lack of flows of capital from rich to poor countries---the Lucas paradox---in an empirical framework. Broadly speaking, the theoretical explanations for this paradox include differences in fundamentals affecting the production structure...

This paper shows that systemic risk exerts a significant impact on the behavior of depositors, sometimes overshadowing their responses to standard bank fundamentals. Systemic risk can affect market discipline both regardless of and through bank fundamentals. First, worsening systemic conditions...

This paper examines the impact of trade costs on real exchange rate volatil- ity. We model two channels endogenously in a Ricardian framework: (i) non- tradability and (ii) heterogeneous suppliers of traded goods. The ¯rst channel is examined by constructing a two-country Ricardian model of...

When univariate methods are applied to real exchange rates, point estimates of autoregressive coefficients typically imply very slow rates of mean reversion. Rogoff (1996) discusses that the remarkable consensus of 3-5 year half-lives of purchasing power parity (PPP) deviations is found among...