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Implications of Asset Market Data for Equilibrium Models of Exchange Rates

Jiang, Zhengyang; Krishnamurthy, Arvind; Lustig, Hanno - National Bureau of Economic Research - 2023

We characterize the relation between exchange rates and their macroeconomic fundamentals without committing to a …-free bonds, the exchange rate appreciates in states that are worse for home investors than foreign investors. This prediction is … at odds with the empirical evidence and can only be overturned if the deviations from U.I.P. are large and exchange rates …

Persistent link: https://www.econbiz.de/10014436982

Fiscal Policy and Financial Depth

Caballero, Ricardo J. - 2004

Most economists and observers place the lack of fiscal discipline at the core of the recent Argentine crisis. This begs the question of how countries like Belgium or Italy (pre-Maastricht) could run large fiscal deficits and accumulate debts far beyond those of Argentina, without experiencing...

Persistent link: https://www.econbiz.de/10012468161

Misallocation and Financial Frictions : Some Direct Evidence From the Dispersion in Borrowing Costs

Gilchrist, Simon - 2012

Financial frictions distort the allocation of resources among productive units--all else equal, firms whose financing choices are affected by such frictions face higher borrowing costs than firms with ready access to capital markets. As a result, input choices may differ systematically across...

Persistent link: https://www.econbiz.de/10012460110

Sizing Up Repo

Krishnamurthy, Arvind - 2012

We measure the repo funding extended by money market funds (MMF) and securities lenders to the shadow banking system, including quantities, haircuts, and repo rates by type of underlying collateral. We find that repo played only a small role in funding private sector assets prior to the crisis,...

Persistent link: https://www.econbiz.de/10012460892

Balance Sheet Adjustments in the 2008 Crisis

He, Zhiguo - 2010

We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing - in particular, the...

Persistent link: https://www.econbiz.de/10012462732

Amplification Mechanisms in Liquidity Crises

Krishnamurthy, Arvind - 2009

I describe two amplifications mechanisms that operate during liquidity crises and discuss the scope for central bank policies during crises as well as preventive policies in advance of crises. The first mechanism works through asset prices and balance sheets. A negative shock to the balance...

Persistent link: https://www.econbiz.de/10012463609

Intermediary Asset Pricing

He, Zhiguo - 2008

We present a model to study the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary. Intermediaries face a constraint on raising equity capital. When the constraint binds, so that intermediaries' equity capital is scarce, risk premia...

Persistent link: https://www.econbiz.de/10012464130

The Demand for Treasury Debt

Krishnamurthy, Arvind - 2007

We show that the US Debt/GDP ratio is negatively correlated with the spread between corporate bond yields and Treasury bond yields. The result holds even when controlling for the default risk on corporate bonds. We argue that the corporate bond spread reflects a convenience yield that investors...

Persistent link: https://www.econbiz.de/10012465775

Expectations, Asset Prices, and Monetary Policy : The Role of Learning

Gilchrist, Simon - 2006

This paper studies the implications of financial market imperfections represented by a countercyclical external finance premium and the gradual recognition of changes in the drift of technology growth for the design of an interest rate rule. Asset price movements induced by changes in trend...

Persistent link: https://www.econbiz.de/10012466222

Flight to Quality and Collective Risk Management

Caballero, Ricardo J. - 2006

We present a model of flight to quality episodes that emphasizes systemic risk and the Knightian uncertainty surrounding these episodes. Agents make risk management decisions with incomplete knowledge. They understand their own shocks, but are uncertain of how correlated their shocks are with...

Persistent link: https://www.econbiz.de/10012466519