While the relationship between volatility and risk is central to much of thefinancial literature it has not been incorporated systematically into assessment ofsovereign debt sustainability. This paper attempts to fill this gap by studying how the probability distribution of sovereign debt to GDP...

This paper extends Galí and Gertler’s (1999) new hybrid KeynesianPhillips curve to the open economy context. We hypothesise that pricing decisionsdepend on both labour costs and intermediate imported input prices. The results forHong Kong are consistent with the theory if import prices are...

While empirical evidence nds only a weak relationship between nominal exchangerates and macroeconomic fundamentals, forex markets participants often attribute ex-change rate movements to a macroeconomic variable. The variables that matter, how-ever, appear to change over time and some variable...

We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied...

This paper develops a quantitative framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and...