This paper analyses the smoothing of asymmetric shocks to output for a sample of OECD countries. It also examines whether the private capital markets will be able to replace the government in providing output smoothing in the euro-area, in the near future. The research finds no evidence of large...

We analyze the worst currency carry loss episodes in recent decades, including causes, attribution by currency, timing, and the duration of carry drawdowns. To explore the determinants of the length of carry losses, a model of carry drawdown duration is estimated. We find evidence that drawdown...

This paper examines how providing better information to customs inspectors and monitoring their actions affects tax revenue and fraud detection in Madagascar. First, an instrumental variables strategy is used to show that transaction-specific, third-party valuation advice on a subset of...

This paper analyzes the effect of the removal of government guarantees on bank risk taking. We exploit the removal of guarantees for German Landesbanken which results in lower credit ratings, higher funding costs, and a loss in franchise value. This removal was announced in 2001, but...

We investigate the trade-off between the risk-sharing gains enjoyed by more interconnected firms and the costs resulting from an increased risk exposure. We find that when the shock distribution displays "fat" tails, extreme segmentation into small components is optimal, while minimal...

Jesús Fernández-Villaverde, Pablo A. Guerrón-Quintana, Juan F. Rubio-Ramírez and Martín Uribe (2011) find that risk shocks are an important factor in explaining emerging market business cycles. We show that their model needs to be recalibrated because it underpredicts the targeted business...

Much of the literature on the economics of mortgage markets has studied the FRM-ARM choice made by individual borrowers. However, to decide if the outcome of such a choice is efficient or approximately so, it is necessary to explore the question of optimal risk-sharing in mortgage contracts. But...

Reliable early warning signals are essential for timely implementation of macroeconomic and macro-prudential policies. This paper presents an early warning system as a set of multi-period forecasts of indicators of tail real and financial (systemic) risks. Forecasts are obtained from: (a)...

Suppose that a group of agents having divergent expectations can share risks efficiently. We examine how this group should behave collectively to manage these risks. We show that the beliefs of the representative agent is in general a function of the group.s wealth level, or equivalently, that...

We consider an OLG economy with endogenous investment in human capital. Heterogeneity in individual human capital levels is generated by random innate ability. The production of human capital depends on each individual s investment in education. This investment decision is taken only after...