This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the...

We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supplying excessive capital to a target economy. The interest-rate differential between their funding currency and the target currency is their coordination device. We...

In the conduct of monetary policy, there exists a risk-return tradeoff between financial conditions and financial stability, which complements the traditional inflation-real activity tradeoff of monetary policy. The tradeoff exists even if monetary policy does not target financial stability...

An important difficulty in many models of behavioral economics is that preferences are endogenous and unstable. Therefore, preferences may not provide the most desirable yardstick to evaluate social states. This paper proposes unconditional love as a candidate for such a yardstick. The concept...

In the aftermath of the recent financial crisis and subsequent recession, slow recoveries have been observed and slowdowns in total factor productivity (TFP) growth have been measured in many economies. This paper develops a model that can describe a slow recovery resulting from an adverse...

The paper assesses how close Asian countries are to an Optimal Currency Area in terms of business cycle synchronization, with a focus on supply shock asymmetry. Based on a Structural VAR model, the importance of symmetric and asymmetric supply shocks is teasted for all ASEAN+3 countries. In...

We empirically investigate the relationship between the Japanese general collateral (GC) repurchase agreement (repo) and uncollateralized call rates before, during, and emerging from the recent financial crisis. Unlike the US and many other countries, the Japanese GC repo rate has been higher...

This paper surveys several applications of parametric copulas to market portfolios, credit portfolios, and enterprise risk management in the banking industry, focusing on how to capture stressed conditions. First, we show two simple applications for market portfolios: correlation structures for...

A central challenge for international financial regulatory systems today is how to manage the impact of Global Systemically Important Financial Institutions (G-SIFIs) on the global economy, given the interconnected and pluralistic nature of regulatory regimes. This article focuses on the...

To keep yields non-negative in a quadratic Gaussian term structure model (QGTM), the short rate is represented by the quadratic form of the Gaussian state variables. The QGTM is among the most attractive candidate tools for analyzing yield curves for countries with low interest rates. However,...