We employ a threshold vector autoregression (TVAR) methodology in order to examine the nonlinear nature of the interactions among credit market conditions, monetary policy, and economic activity. We depart from the existing literature on the subject along two dimensions. First, we focus on a...

Very low interest rates in major currencies have raised concerns over international credit flows to robustly growing economies in Asia. This paper examines three components of international credit and highlights several of the policy challenges that arise in constraining such credit. Our...

Do public policy signals improve the alignment of market outcomes with economic fundamentals? Existing work contends that, when individual players have an incentive to coordinate their actions, public policy signals could steer these actions away from the fundamentals. We argue that such a...

What are the main drivers of fluctuations in the aggregate US stock market? In this paper, we attempt to resolve the long-lasting debate surrounding this question by designing and solving a consumption-based asset pricing model which incorporates stochastic volatility, long-run risks in...

This paper constructs a new dataset of quarterly capital flows by sector and establishes four facts. First, the co-movement of capital inflows and outflows is driven by banks. Second, procyclicality of capital inflows is driven by banks and corporates, whereas sovereigns' external liabilities...

Cross-border bank lending to emerging markets slowed sharply during the taper tantrum. The abruptness of this slowdown varied considerably across both lenders and borrowers. We use newly available data to explain the drivers of this cross-sectional variation. Although the initial tapering shock...

We demonstrate that inference from estimated structural News Driven Business Cycle (NDBC) models about the main drivers of fluctuations in macroeconomic variables and asset prices is sensitive to assumptions about the structure of the news shock processes. We show that, when data on asset prices...

Contingent convertible capital instruments (CoCos) are hybrid capital securities that absorb losses when the capital of the issuing bank falls below a certain level. In this article, we go over the structure of CoCos, trace the evolution of their issuance, and examine their pricing in primary...

Using the standard principal-agent framework, we show that the existence of executives with different levels of productivity introduces a so-far-unexplored channel through which managerial effort incentives are sustained in a setting in which executives are allowed to trade away their...