In this paper we develop a theoretical model in order to understand comovements between asset returns and consumption over longer horizons. We develop an intertemporal general equilibrium model featuring two types of shocks: small, frequent and disembodied shocks to productivity and large...

Currencies that are at a forward premium tend to depreciate. This `forward premium-depreciation anomaly' represents an egregious deviation from uncovered interest parity. We document the returns to currency speculation strategies that exploit this anomaly. The first strategy, known as the carry...

In this paper, I propose and test a simple technology-based theory of firms' sensitivities to aggregate shocks. I show that when the elasticity of substitution between capital and labor is below unity, low profitability firms are more sensitive to aggregate shocks, i.e. to the business cycle....

Using US quarterly post-war data, this paper documents the existence of two common trends among non-housing non durable and housing consumption, financial and real estate wealth, and labour income (a proxy for human wealth). The first equilibrium relationship reflects the stationarity of the...

The present project introduces the possibility of default on the trading contracts in an infinite horizon incomplete markets model, relaxing the usual assumption made in the literature with respect to the trading limits, which are chosen to be fixed or independent of the characteristics of the...

I analyze the implications of moral hazard in dynamic economy with production. In particular, I add agency frictions to a benchmark stochastic growth model, by assuming that firms observe output but hours worked and productivity are unobservable. I cast the problem as a continuous time principal...

We develop a dynamic model of sovereign default and renegotiation to study how expectations of default and debt restructuring in the near future affect the ex ante maturity structure of sovereign debts. This paper argues that the average maturity is shorter when a country is approaching...

The ability to insure against idiosyncratic endowment risk depends on the organization of markets and the availability of consumption insurance. When all agents are identical ex ante and there are complete contingent claims, then full insurance can be achieved. Simple frictions, such as...