Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can always observe all relevant firm information. But all...

We analyse the impact of interactions between monetary and fiscal policy on macroeconomic stability. We find that in the presence of sovereign default beliefs a monetary policy, which aims to stabilize inflation through an active interest rate policy, will destabilize the economy if the feedback...

We assess whether climate transition risk is priced in Europe's equity market by analysing relative equity returns of high versus low CO2-emitting firms. We use a panel data set covering firm-specific carbon emissions of 1,555 European companies over the period 2005-2019. We add to the existing...

Blanchard (2005) suggested that active interest rate policy might induce unstable dynamics in highly-indebted economies. We examine this in a dynamic general equilibrium model where Calvo-type price rigidities provide a rationale for inflation stabilization. Unstable dynamics can occur when the...

If there is exchange market pressure (EMP), monetary authorities can use the interest rate and official interventions to offset this depreciation tendency, or they can let the exchange rate change. We introduce a new approach to derive how these three variables should be combined to measure EMP....

In this paper we argue that authorities aid cooperation by means ofdirect coordination or the enforcement of re-commitment devices suchas contract laws.Credible threats of violence allow this role. In alocal interaction model, an authority forms if mutually connected individuals with sufficient...

In this paper, I consider the identification of lagged durationdependence in multiple spells without using the assumtion that there are additionalregressors orthogonal to the individual effects. The non-parametricidentification strategy is applied to the multiple non-employment spells of 2066...