Digitalization and the innovative use of digital technologies is changing the way we work, learn, communicate, buy and sell products. One emerging digital technology of growing importance is cloud computing. More and more businesses, governments and households are purchasing hardware and...

The paper examines the potential effects of international migration on labor force participation in advanced economies in Europe. It documents that migration played a significant role in alleviating aging pressures on labor supply by affecting the age composition of receiving countries'...

Investors seek to hedge against interest rate risk by taking long or short positions on bonds of different maturities. We study changes in risk taking behavior in a low interest rate environment by estimating a market stochastic discount factor that is non-linear and therefore consistent with...

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches-liquidity tranche and investment tranche-especially for those with adequate reserves. Incorporating reserve tranching, we have developed in...

When constructing hedged interest rate arbitrage portfolios for basket currencies, two issues arise: first, how are the unknown future basket weights optimally forecasted from past exchange rate data? And, second, how is risk—in terms of the conditional variance of expected profits from the...

This paper models the idiosyncratic or asset-specific return of an asset as the return on a portfolio that is long in that asset and short in other assets in the same class, thereby removing the common components of returns. This is the type of “hedged” position that is held by...

This paper analyzes the role of nonseparable utility and nontradables in business cycles and portfolio choice. I find that nonseparability in utility can change the portfolio choice significantly. Unlike previous results in literature, the optimal portfolio of the traded-good sector equities is...

This paper tests a model of the role of stock markets in current account dynamics, developed in a companion paper. With U.S. data, the model performs better than the same model without stock markets. An insight given by the model is that the current account might help predict future stock market...