This paper combines the standard incomplete markets model of uninsurable idiosyncratic risks and borrowing constraints with the Arrow/Romer approach to endogenous growth to analyze the interaction of risk, growth, and inequality, the latter also endogenously determined in equilibrium. We derive...

This paper estimates a bivariate HEAVY system including daily and intra-daily volatility equations and its macro-augmented asymmetric power extension. It focuses on economic factors that exacerbate stock market volatility and represent major threats to financial stability. In particular, it...

Macroeconomic uncertainty affects the subjective distribution of individual expectations. Using four panel datasets, we document the effects of macro uncertainty on the mean expectation (first moment) and subjective uncertainty (second moment) of income forecasts. We find that macro uncertainty...

We derive the optimal exchange rate policy for a small open economy subject to terms-oftrade shocks. Firm owners and workers are risk averse but workers more so. Wages are given or partially indexed in the short run, and capital markets are imperfect. The government sets the exchange rate to...