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Lumpy Investment in Dynamic General Equilibrium

Bachmann, Ruediger; Engel, Eduardo; Caballero, Ricardo J. - 2006

-2000 sample, the initial response of investment to a productivity shock with responses in the top quartile is 60% higher than the … shock. Conversely, a slowdown after a boom can lead to a long lasting investment slump, which is unresponsive to policy … smoothing in the investment response to aggregate shocks. The remaining 40% is explained by general equilibrium forces. The …

Persistent link: https://www.econbiz.de/10014057432

The Safety Trap

Caballero, Ricardo J. - 2016

In this paper we provide a model of the macroeconomic implications of safe asset shortages. In particular, we discuss the emergence of a deflationary safety trap equilibrium with high risk premia. It is an acute form of a liquidity trap, in which the shortage of a specific form of assets, safe...

Persistent link: https://www.econbiz.de/10013006687

Rents, technical change, and risk premia : accounting for secular trends in interest rates, returns on capital, earning yields, and factor shares

Caballero, Ricardo J.; Farhi, Emmanuel; Gourinchas, … - 2017

The secular decline in safe interest rates since the early 1980s has been the subject of considerable attention. In this short paper, we argue that it is important to consider the evolution of safe real rates in conjunction with three other first-order macroeconomic stylized facts: the relative...

Persistent link: https://www.econbiz.de/10011689324

Carry Trade and Systemic Risk : Why are FX Options So Cheap?

Caballero, Ricardo J. - 2012

In this paper we document first that, in contrast with their widely perceived excess returns, popular carry trade strategies yield low systemic-risk-adjusted returns. In particular, we show that carry trade returns are highly correlated with the return of a VIX rolldown strategy — i.e., the...

Persistent link: https://www.econbiz.de/10013096641