Abstract: Shocks to bank lending, risk-taking and securitization activities that are orthogonal to real economy and monetary policy innovations account for more than 30 percent of U.S. output variation. The dynamic effects, however, depend on the type of shock. Expansionary securitization shocks...

Risk premia in the consumption capital asset pricing model depend on preferences and dividend. We develop a decomposition which allows a separate treatment of both components. We show that preferences alone determine the risk-return tradeoff measured by the Sharpe-ratio. In general, the...

This paper explores the interaction between retirement flexibility and portfolio choice in an overlapping-generations model. We analyse this interaction both in a partial-equilibrium and general-equilibrium setting. Retirement flexibility is often seen as a hedge against capital-market risks...

Theory predicts that under certain restrictions on preferences prudent consumers will allocate relatively more funds to riskless assets when there is uninsurable background risk. This paper analyzes empirically the relevance of precautionary motives for the structure of household wealth. To this...

This paper links the current subprime mortgage crisis to a decline in lending standards associated with the rapid expansion and changes in the structure of this market. We show that lending standards declined more in areas that experienced faster credit growth. We also find that the entry of new...

Abstract: We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘dynamic’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and...

In this paper, we investigate the relationship between financial wealth, reservation wages and labour market transitions. According to the theory, higher levels of wealth will result in higher reservation wages and lower employment probabilities. We test for the validity of this assumption by...

This paper explores the optimal risk sharing arrangement between generations in an overlapping generations model with endogenous growth.We allow for nonseparable preferences, paying particular attention to the risk aversion of the old as well as overall "life-cycle" risk aversion.We provide a...

Among U.S. middle-class households, the marginal propensity to consume is either invariant to household wealth or a U-shaped function thereof. In contrast, precautionary savings models predict that wealth reduces the marginal propensity to consume. We bridge this gap between theory and data with...