We study how perceived government support for state-owned enterprises (SOEs), can shut out non-SOEs in China's credit market, causing severe segmentation in credit pricing. Since 2018Q2, amid government-led credit tightening, the SOE premium – the difference in credit spreads between non-SOE...

Employing a large number of real and financial indicators, we use Bayesian Model Averaging (BMA) to forecast real-time measures of economic activity. Importantly, the predictor set includes option-adjusted credit spread indexes based on bond portfolios sorted by maturity and credit risk as...

We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic...

This paper develops a parsimonious static model for characterizing financing terms in collateralized lending markets. We characterize the systematic risk exposures for a variety of securities and develop a simple indifference-pricing framework to value the systematic crash risk exposure of the...

Theory predicts that there is a close link between bank credit supply and the evolution of the business cycle. Yet fluctuations in bank-loan supply have been hard to quantify in the time-series. While loan issuance falls in recessions, it is not clear if this is due to demand or supply. We...

We investigate the characteristics and the default behavior of households who take out complex mortgages. Unlike traditional fixed rate or adjustable rate mortgages, complex mortgages are not fully amortizing and enable households to postpone loan repayment. We find that complex mortgages are...

We study the cyclical implications of credit market imperfections in a calibrated dynamic, stochastic general equilibrium model wherein firms face persistent shocks to aggregate and individual productivity. In our model economy, optimal capital reallocation is distorted by two frictions:...

The US government has recently conducted large scale purchases of assets and implemented policies that reduced the cost of funds to financial institutions. Arguably these policies have helped to correct credit market dysfunctions, allowing interest rate spreads to shrink and output to begin a...

Conventional wisdom about the relationship between income distribution and economic development has been subjected to dramatic transformations in the past century. While classical economists advanced the hypothesis that inequality is beneficial for growth, the neoclassical paradigm dismissed the...

We construct a simple model in which high inflation imposes welfare costs because it affects the ability of the financial sector to screen between high and low cost producers. Consumers search for a low price and inflation reduces the incentives to search, resulting in an increase in the demand...