This paper shows that the risk of devaluation can be an important factor accounting for the stylized facts of exchange … of a small open economy calibrated to Mexico's 1987-1994 stabilization plan. In the model a time-variant interest rate … tax induces endogenous state-contingent wealth effects via fiscal adjustment and suboptimal investment. Devaluation risk …

superior. The intuition is simple: if underlying technologies are not convex, then risk-sharing can lower expected utility. The … likelihood of a bankruptcy cascade, "contagion," and systemic risk …

aggregate risk created by non-participants. We calibrate the heterogeneity in trading technologies to match the equity premium … and the risk-free rate. The calibrated model reproduces the skewness and kurtosis of the wealth distribution in the data … volatility of the risk-free rate …

account for the risk premia and asset price fluctuations. In addition, the model can empirically account for the cross …

International consumption risk sharing studies have largely ignored their models' counterfactual implications for asset … returns although these returns incorporate direct market measures of risk. In this paper, we modify a canonical risk … variance of equity returns and the risk-free rate requires persistent consumption risk, leading to three main findings: (1 …

This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty …

) bilateral exports to the United States. The patterns in the data are consistent with the theory. The mean and the variance of …

assets in the economy is greater than zero, an increase in inflation uncertainty will lower the risk premia on all real …This paper investigates the effect of inflation uncertainty on the portfolio behavior of households and the equilibrium … structure of capitol market rates. The principal findings regarding portfolio behavior are: (1.) In the presence of inflation …

This paper estimates expected future real interest rates and inflation rates from observed prices of UK government …-linked bonds. It assumes that expected log returns on all bonds are equal, and that expected real interest rates and inflation … inflation expectations forecast actual future inflation more accurately than nominal yields do. The estimated real interest rate …