We consider an infinite-horizon inter-generational economy with identical agents differing only in their inherited wealth and with a constant-returns-to-scale technology using capital and labour (called "effort") and displaying a purely idiosyncratic risk. If effort is contractible, full...

This paper reveals the underlying market’s preferences over the on going Euro area sovereign debt crisis. It builds on a loss function with reference to the ‘basis’, the difference between the spread over swap and Credit Default Swap (CDS) for sovereign bonds. This loss function is general...

We show, in an exchange economy with default, liquidity constraints and no aggregate uncertainty, that state prices in a complete markets general equilibrium are a function of the supply of liquidity by the Central Bank. Our model is derived along the lines of Dubey and Geanakoplos (1992). Two...

I study the cross sectional variation of stock returns and technological progress using a dynamic equilibrium model with production. In the model, technological progress is en- dogenously driven by R&D investment and is composed of two parts. One part is product innovation devoted to creating...

The Bansal and Yaron (2004) model of long run risks (LLR) in aggregate consumption and dividend growth and its extension that captures potential co- integration of the consumption and dividend levels, are tested on a cross-section of asset classes and rejected using annual data over the period...

The paper draws lessons from the experience of the past year for the conduct of central banks in the pursuit of macroeconomic and financial stability. Macroeconomic stability is defined as either price stability or as price stability and sustainable output or employment growth. Financial...

We document that the firm level hiring rate predicts stock returns in the cross-section of US publicly traded firms even after controlling for investment, size, book-to-market and momentum as well as other known predictors of stock returns. The predictability shows up in both Fama-MacBeth cross...

Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly...

In an attempt to clean up an unruly literature, we specify the necessary and sufficient conditions for household optimality in a model where money is the only …financial asset and provide the relevant proofs. We use our results to analyse when de‡flationary bubbles can and cannot exist. Our...

We extend the New Keynesian Monetary Policy literature relaxing the assumption that the decisions are taken by a single policymaker, considering instead that monetary policy decisions are taken collectively in a committee. We introduce a Monetary Policy Committee (MPC), whose members have...