This paper examines the macroeconomic implications of sovereign credit risk in a business cycle model where banks are … generates a precautionary motive for banks to deleverage (risk channel). I estimate the model using Italian data, finding that i …) sovereign credit risk was recessionary and that ii) the risk channel was sizable. I then use the model to evaluate the effects …

stockholders bear a disproportionate share of output uncertainty. We do this in the context of a non-Walrasian RBC model where risk … reallocation is justified by borrowing restrictions. The risk shifting mechanism we propose has the same effect as would arise from … a substantial increase in the risk aversion parameter of the representative agent. As with more standard RBC models, it …

This paper develops a dynamic continuous-time model in which international risk sharing can yield substantial welfare …

We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in … model based on our pricing kernel. The model incorporates the key relationships between policy and risk movements in an … fluctuations in risk that threaten to push inflation off target. This model, while an improvement over standard models, is …

We use a model of optimal portfolio choice to measure heterogeneity in risk aversion among households in Thai villages …. There is substantial heterogeneity in risk preferences, positively correlated in most villages with alternative estimates … based on a full risk-sharing model. …

model is used to study the allocation of risk and the distribution of income over the business cycle. …

, financial institutions fail to internalize risks their investments impose on society, thereby creating a “risk externality ….” This paper proposes that just as taxes are imposed to deal with pollution externalities, taxes can also address risk … externalities. ; The size of the optimal tax depends on risk-related attributes and may be difficult for supervisors to calculate …

Concerns about constructing and maintaining good reputations are known to reduce borrowers' excessive risk …