This paper studies how non-Gaussian shocks affect risk premia in DSGE models approximated to second and third order. Based on an extension of the work by Schmitt-Grohe and Uribe to third order, we derive propositions for how rare disasters, stochastic volatility, and GARCH affect any risk premia...

We develop a dynamic stochastic general equilibrium framework that can account for important macroeconomic and financial moments, given Epstein-Zin preferences, heterogeneous banking and third-order approximation methods that yield a time-varying term premium that feeds back to the real economy....

Within-firm variation of corporate bond spreads around the Covid-19 outbreak shows that US dollar-denominated bonds experienced larger increases in spreads relative to non-dollar bonds, especially at short maturities. Differently, in the non-dollar sample it was the spreads of longer maturity...

In this paper we investigate the price, volatility and micro-level effects of central bank swap lines during the 2020 pandemic. These policies lowered the ceiling on covered interest rate parity violations and reduced volatility following settlement of swap line auctions. We then combine...

Long-horizon interest rates in the major international bond markets fell sharply during 2004 and 2005, at the same time as US policy rates were rising; a phenomenon famously described as a 'conundrum' by Alan Greenspan the Federal Reserve Chairman. But it was arguably the decline in...

This paper develops a DSGE model which explains variation in the nominal and real term structure along with inflation surveys and four macro variables in the UK economy. The model is estimated based on a third-order approximation to allow for time-varying term premia. We find a fall in nominal...

This paper develops a DSGE model in which banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show within a real business cycle...

Gertler and Karadi combined financial intermediation and credit policy in a DSGE framework. We estimate their model with UK data using Bayesian techniques. To validate the fit, we evaluate the model's empirical properties. Then we analyse the transmission mechanism of the shocks, set to produce...

This paper provides novel empirical evidence showing that foreign financial developments are a powerful predictor of domestic banking crises. Using a new data set for 38 advanced and emerging economies over 1970–2011, we show that credit growth in the rest of the world has a large positive...

I assess the use of overnight indexed swap (OIS) rates as measures of monetary policy expectations. I find that one to twelve-month US OIS rates provide measures of investors' interest rate expectations that are comparable to those from corresponding-horizon federal funds futures rates, which...