This paper analyzes bond convenience yields in a currency union. The intertemporal government budget constraint requires member countries' bond convenience yields and default spreads to adjust in response to shocks to their government surpluses. In the data, adjustments to convenience yields...

Using MBA textbook finance, we look at three simple examples to illustrate why the r-g measure of the fiscal cost of deficits is incomplete. We start by considering the case of risky government debt. Second, we consider the case of risk-free debt. Third, we allow for convenience yields. In each...

In a model with housing collateral, the ratio of housing wealth to human wealth shifts the conditional distribution of asset prices and consumption growth. A decrease in house prices reduces the collateral value of housing, increases household exposure to idiosyncratic risk, and increases the...