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Bansal, Ravi - 2002

In this paper we show that measures of economic uncertainty (conditional volatility of consumption) predict and are predicted by valuation ratios at long horizons. Further we document that asset valuations drop as economic uncertainty rises that is, financial markets dislike economic...

Persistent link: https://www.econbiz.de/10012469320

Closing Small Open Economy Models

Schmitt-Grohe, Stephanie - 2002

The small open economy model with incomplete asset markets features a steady state that depends on initial conditions and equilibrium dynamics that possess a random walk component. A number of modifications to the standard model have been proposed to induce stationarity. This paper presents a...

Persistent link: https://www.econbiz.de/10012469439

Financial Super-Markets : Size Matters for Asset Trade

Martin, Philippe - 2001

We introduce a new theoretical framework to analyze imperfectly competitive financial markets and trade in assets in an international context. We present a two-country macroeconomic model in which agents are risk averse, assets are imperfect substitutes, the number of financial assets is...

Persistent link: https://www.econbiz.de/10012470242

International Risk Sharing is Better Than You Think (or Exchange Rates are Much Too Smooth)

Brandt, Michael W. - 2001

Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility...

Persistent link: https://www.econbiz.de/10012470316

Asymptotic Methods for Asset Market Equilibrium Analysis

Judd, Kenneth L. - 2001

General equilibrium analysis is difficult when asset markets are incomplete. We make the simplifying assumption that uncertainty is small and use bifurcation methods to compute Taylor series approximations for asset demand and asset market equilibrium. A computer must be used to derive these...

Persistent link: https://www.econbiz.de/10012470594

The Market for Catastrophe Risk : A Clinical Examination

Froot, Kenneth A. - 2001

with natural hazards, such as hurricanes and earthquakes. Risk management theory suggests protection by insurers and other …, especially after cat events. We then examine clinical evidence to understand why the theory fails. Specifically, we examine … hints as to why the theory fails. We explore these hints in eight theoretical explanations and find the most compelling to …

Persistent link: https://www.econbiz.de/10012470619

The Pricing of Event Risks with Parameter Uncertainty

Froot, Kenneth A. - 2001

Financial instruments whose payoffs are linked to exogenous events, such as the occurrence of a natural catastrophe or an unusual weather pattern depend crucially on actuarial models for determining event (e.g., default) probabilities. In many instances, investors appear to receive premiums far...

Persistent link: https://www.econbiz.de/10012470623

Financial Policies and the Prevention of Financial Crises in Emerging Market Countries

Mishkin, Frederic S. - 2001

This paper outlines a set of financial policies that can help make financial crises less likely in emerging market countries. To justify these policies, the paper first explains what a financial crisis is, the factors that promote a financial crisis and the dynamics of a financial crisis. It...

Persistent link: https://www.econbiz.de/10012470642

Endogenous Pricing to Market and Financing Costs

Aizenman, Joshua - 2000

This paper studies the endogenous determination of pricing to market, in a model with time dependent transportation costs, where the future terms of trade are random. Allowing time dependent transportation costs adds a dimension of investment to the pre-buying of imports, implying that financial...

Persistent link: https://www.econbiz.de/10012470823

Money, Interest Rates, and Exchange Rates with Endogenously Segmented Asset Markets

Alvarez, Fernando - 2000

This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...

Persistent link: https://www.econbiz.de/10012470866