A good description of the dynamics of interest rates is crucial to price derivatives and to hedge corresponding risk. Interest rate modelling in an unstable macroeconomic context motivates one factor models with time varying parameters. In this paper, the local parameter approach is introduced...

We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminating between competing sources of this return predictability...

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...

This paper employs a Markov regime-switching approach to investigate whether the Great Moderation is over since the start of the late 2000s recession. The results conrm that the recent nancial crisis did cause a simultaneous high-volatility period among the G7 countries. However, the nancial...

We extend the monetary DSGE model by Gertler and Karadi (2011) with a non-bank financial intermediary to investigate the impact of monetary policy shocks on aggregate loan supply. We distinguish between bank and non-bank intermediaries based on the liquidity of their credit claims. While banks...

A growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time. This paper proposes an empirical approach suitable to test these hypothe- ses. We...

Are financial cycles an international phenomenon, and, if so, how do financial cycles interact? This letter provides new evidence for the US and the UK. Considering the properties of the data in both the time and the frequency domains, we find a strong relation between the financial cycles of...

Lack of transparency in securitization transactions significantly contributed to the severe financial crisis of 2007–2009. To increase transparency we propose a new mechanism: financial claims with fingerprints. They would allow market participants at each stage of the securitization process...

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common ("efficient return") factor and two market-side-specific components...

This paper examines the comovement of the stock market and of real activity in Germany before World War I under the effcient market hypothesis. We employ multivariate spectral analysis to compare rivaling national product estimates to stock market behavior in the frequency domain. Close...