Firms with high pre-crisis cash holdings invested significantly more than their cash-poor rivals during the global financial crisis and especially so during the recovery phase. This resulted in a persistent and growing investment gap between cash-rich and cash-poor firms. Cash especially...

We find that capital renting makes up one fifth of US capital expenditures, and it increases during downturns. Further, we present cross-country evidence that output losses after financial crises are smaller where renting is more prevalent. To understand these findings, we build a general...

This paper identifies shocks to credit conditions based on aggregate firms' debt composition. I develop a model where firms fund production with bonds and loans. Only financial shocks imply opposite movements in the two types of debt as firms adjust their debt composition to new credit...

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...

If bail-in is credible, risk premia on bank securities should decrease as funding sources junior to and alongside them in the creditor hierarchy increase. Other things equal, we find that when banks have more equity and less subordinated debt they have lower risk premia on both. When banks have...

The level of UK corporate debt directly affects financial stability in the United Kingdom because a significant amount of the exposure of the UK financial system is to UK corporates. Our paper provides a comparison of the determinants of corporate debt in the United States, the United Kingdom,...