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We propose an endogenous regime\u2010switching formulation of the occasionally binding borrowing constraint, develop a general perturbation method to solve the model, and estimate it using Bayesian methods. We find that the model fits the Mexican data well without systematically relying on large shocks, matching the typical stylized facts of emerging market business cycles and Mexico's history of sudden stops in capital flows. We also find that interest rate shocks play a smaller role in driving both cycles and crises than previously found in the literature.<\/jats:p>","DOI":"10.3982\/qe2038","type":"journal-article","created":{"date-parts":[[2025,1,23]],"date-time":"2025-01-23T11:10:12Z","timestamp":1737630612000},"page":"1-47","source":"Crossref","is-referenced-by-count":12,"title":["Estimating macroeconomic models of financial crises: An endogenous regime\u2010switching approach"],"prefix":"10.3982","volume":"16","author":[{"given":"Gianluca","family":"Benigno","sequence":"first","affiliation":[{"name":"Department of Economics, University of Lausanne"},{"name":"CEPR"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Andrew","family":"Foerster","sequence":"additional","affiliation":[{"name":"Economic Research Department, Federal Reserve Bank of San Francisco"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Christopher","family":"Otrok","sequence":"additional","affiliation":[{"name":"Research Department, Federal Reserve Bank of Dallas"}],"role":[{"vocabulary":"crossref","role":"author"}]},{"given":"Alessandro","family":"Rebucci","sequence":"additional","affiliation":[{"name":"Carey Business School, Johns Hopkins University"},{"name":"ABFER"},{"name":"CEPR"},{"name":"NBER"}],"role":[{"vocabulary":"crossref","role":"author"}]}],"member":"2359","published-online":{"date-parts":[[2025]]},"reference":[{"issue":"3","key":"quan200356-bib-0001","doi-asserted-by":"crossref","first-page":"728","DOI":"10.1016\/j.jmoneco.2005.11.003","volume":"54","author":"Adam","year":"2007","journal-title":"Journal of Monetary Economics"},{"key":"quan200356-bib-0002","doi-asserted-by":"crossref","first-page":"69","DOI":"10.1086\/511283","volume":"115","author":"Aguiar","year":"2007","journal-title":"Journal of Political Economy"},{"key":"quan200356-bib-0003","unstructured":"Alpanda, Sami and Alexander Ueberfeldt (2016), \u201cShould monetary policy lean against housing market booms?\u201d Staff Working Papers 16-19, Bank of Canada."},{"issue":"1","key":"quan200356-bib-0004","doi-asserted-by":"crossref","first-page":"1","DOI":"10.1093\/restud\/rdx037","volume":"85","author":"Andreasen","year":"2018","journal-title":"Review of Economic Studies"},{"issue":"1","key":"quan200356-bib-0005","doi-asserted-by":"crossref","first-page":"87","DOI":"10.1093\/restud\/rdx027","volume":"85","author":"Aruoba","year":"2018","journal-title":"Review of Economic Studies"},{"issue":"12","key":"quan200356-bib-0006","doi-asserted-by":"crossref","first-page":"2477","DOI":"10.1016\/j.jedc.2005.07.008","volume":"30","author":"Aruoba","year":"2006","journal-title":"Journal of Economic Dynamics and Control"},{"key":"quan200356-bib-0007","doi-asserted-by":"crossref","unstructured":"Ates, Sina and Felipe Saffie (2016), \u201cFewer but better: Sudden stops, firm entry, and financial selection.\u201d International Finance Discussion Papers 1187, Board of Governors of the Federal Reserve System (U.S.).","DOI":"10.17016\/ifdp.2016.1187"},{"key":"quan200356-bib-0008","unstructured":"Atkinson, Tyler, Alexander W. 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