This paper presents a model developed to explain the life-cycle patterns in both homeownership and portfolio allocation, and the relationship between them, using a model of rational agents. Two key innovations are incorporated into this model. First, housing is explicitly modeled as both a...

We develop a simple analytical model that highlights the effect of factor rigidities and credit constraints on bankruptcies. In our model, entrepreneurs receive random shocks –positive or negative-- to their working capital, which is needed to pay workers before the output of the firm is...

This paper presents a dynamic model for a small open economy with imperfect financial market. It provides a framework to analyze the role of credit constraints and debt denomination in the generation and amplification of macroeconomic instability in an open economy context. As in Bernanke and...

This study sets out to develop a simplified risk premium model to explain output volatility within the economies of Asia in the immediate aftermath of the Asian financial crisis. Firms are allowed to borrow from both domestic and foreign banks, with the firms� debts being loosely...

This paper uses the open economy structural VAR model developed in Buckle, Kim, Kirkham, McLellan and Sharma (2002) to evaluate the impact of monetary policy on New Zealand business cycles and inflation variability and the output/inflation variability trade-off. The model includes a...

We use household data to estimate the cost of participating to financial markets and the cross sectional dispersion of stock market optimism. Our analysis is based on a mean-variance framework, within which we derive structural decision rules for individual composition of the risky assets...

This paper tests stylized facts and theories from behavioral economics and laboratory experiments using a randomized field experiment of our design. A major South African consumer credit lender issued 60,000 scripted direct mail solicitations where several marketing “treatments†were...

If country and currency risk premiums are positively correlated, a negative international liquidity shock harms twice the economy, thereby substantially increasing interest rates. This harmful positive correlation between country and currency risk premiums observed in some countries is called...

Latin American economies are exposed to ubstantial external vulnerability. Domestic imbalances and terms of trade shocks are often exacerbated by sudden financial distress. In this paper we explore ways of overcoming external vulnerability drawing lessons from a detailed comparison of the...