This paper uses the methodology of Hansen and Jaganathan (1991) to derive a lower bound on the correlation between any pair of asset returns under the hypothesis of complete markets. The bound is a simple function of the two assets' Sharpe ratios and the coefficient of variation of a unique...

This paper studies a banking industry subject to common and idiosyncratic shocks. We compare two types of regulatory closure rules: (1) an “absolute closure rule,” which closes banks when their asset–liability ratios fall below a given threshold, and (2) a “relative closure rule,”...

This paper uses Blanchard's (1985) model to study the relationship between budget deficits and trade deficits. The model is applied to annual post-war data from the U.S., Japan, and Germany. I find that in all three countries there is a significant link between trade deficits and budget...

This paper estimates a linearized, stochastic version of Kiyotaki and Moore's (1997) credit cycle model, using land price data from Hong Kong, Japan, and Korea. It is shown that the welfare costs of borrowing constraints are positively related to the persistence of (detrended) land price...