In the run-up to the financial crisis, indebtedness of households and non-financial businesses rose to historically high levels in many OECD countries; gross debt of financial companies rose dramatically relative to GDP. Much of the debt accumulation appears to have been based on excessive...

In the run-up to the financial crisis, indebtedness of households and non-financial businesses rose to historically high levels in many OECD countries; gross debt of financial companies rose dramatically relative to GDP. Much of the debt accumulation appears to have been based on excessive...

Mortgage equity withdrawals (MEW) are correlated with covariates consistent with a permanent income framework augmented for credit-constraints. We assess linkages between MEW and financial literacy/education using the Health and Retirement Study (HRS) and Panel Study of Income Dynamics (PSID)....

The consumption behaviour of UK, US and Japanese households is examined and compared using a modern Ando-Modigliani style consumption function. The models incorporate income growth expectations, income uncertainty, housing collateral and other credit effects. These models therefore capture...

There is widespread disagreement about the role of housing wealth in explaining consumption. This paper exploits liquid and illiquid wealth time series from household balance sheet data for South Africa, previously constructed by the authors, to explain fluctuations in the ratios of consumption...

This paper documents the role of consumption in explaining the weak interest rate effect of monetary transmission in Japan. Economic theory suggests circumstances in which a rise in short term real interest rates can increase consumption, contrary to much conventional wisdom. This paper suggests...

This chapter puts forward a manual for how to setup and solve a continuous time model that allows to analyze endogenous (1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility Paradox. Concepts such as (4) illiquidity and liquidity...

We argue that there is a connection between the interbank market for liquidity and the broader financial markets, which has its basis in demand for liquidity by banks. Tightness in the market for liquidity leads banks to engage in what we term “liquidity pull-back,” which involves selling...

Using a new dataset for the German market, this article analyses whether modeling time-varying stochastic discount factor parameters in the CAPM of Sharpe (1964), the HCAPM of Jagannathan and Wang (1996) and the CCAPM of Lucas (1978) can help to explain the cross-section of book-to-market, size...

A major research initiative in finance focuses on the determinants of the cross-sectional and time series properties of asset returns. With that objective in mind, asset pricing models have been developed, starting with the capital asset pricing models of Sharpe (1964), Lintner (1965), and...