This paper shows that the risk of devaluation can be an important factor accounting for the stylized facts of exchange … of a small open economy calibrated to Mexico's 1987-1994 stabilization plan. In the model a time-variant interest rate … tax induces endogenous state-contingent wealth effects via fiscal adjustment and suboptimal investment. Devaluation risk …

superior. The intuition is simple: if underlying technologies are not convex, then risk-sharing can lower expected utility. The … likelihood of a bankruptcy cascade, "contagion," and systemic risk …

International consumption risk sharing studies have largely ignored their models' counterfactual implications for asset … returns although these returns incorporate direct market measures of risk. In this paper, we modify a canonical risk … variance of equity returns and the risk-free rate requires persistent consumption risk, leading to three main findings: (1 …

This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty …

This paper estimates expected future real interest rates and inflation rates from observed prices of UK government …-linked bonds. It assumes that expected log returns on all bonds are equal, and that expected real interest rates and inflation … inflation expectations forecast actual future inflation more accurately than nominal yields do. The estimated real interest rate …

-expected inflation can lower the real value of outstanding government debt. Looking forward, we derive a formula for the debt burden that … relies on detailed information about debt maturity and claimholders, and that uses option prices to construct risk …-adjusted probability distributions for inflation at different horizons. The estimates suggest that it is unlikely that inflation will lower …

contagion across sovereign bonds between Argentina and Mexico. The estimates of the simultaneous parameters are relatively to …

inflation and depreciation rates. We use a first-generation type model of speculative attacks which has four key features: (i … the crises; (iii) a portion of the government's liabilities are not indexed to inflation; and (iv) there are nontradable … account for the high rates of devaluation and moderate rates of inflation often observed in the wake of currency crises. We …