myopic politicians face political risk and prefer to extract political rents as early as possible. An implication of this …

We provide a continuous-time “risk-centric” representation of the New Keynesian model, which we use to analyze the …

assumptions: Economic risk is high relative to political risk, markets are sufficiently incomplete, and there exists a rent …

In this paper we: (i) provide a model of the endogenous risk intolerance and severe aggregate demand contractions … addressing these contractions. The key mechanism stems from heterogeneous risk tolerance: as a recessionary shock hits the … economy and brings down asset prices, risk-tolerant agents' wealth share declines and their leverage rises endogenously. This …

explicitly absorb a larger share of the systemic risk. The options for doing this range from surplus countries rebalancing their … securitization industry while removing the systemic risk from the banks' balance sheets. Such public-private solutions could be …

strategies yield low systemic-risk-adjusted returns. In particular, we show that carry trade returns are highly correlated with … compensation for systemic risk. We show that this result stems from the fact that the corresponding portfolio of exchange rate …