The Global Crisis demonstrated to the world that Ratings Agencies had misled the public about the stability of financial institutions. The Finance literature had decided that it was impossible to have bubbles in financial markets and any surge in the stock market would be self-correcting. Recent...

In this paper we: (i) provide a model of endogenous risk intolerance and serve aggregate demand contractions following a large (non-financial) shock; and (ii) demonstrate the effectiveness of Large Scale Asset Purchases (LSAPs) in addressing these contractions. The key mechanism stems from...

This paper presents a method to capture the growth of financial fragility within a country and across countries. This is done by focusing on housing finance in the United States, the United Kingdom, and France. Following the theoretical framework developed by Hyman P. Minsky, the paper focuses...

This paper presents a method to capture the growth of financial fragility within a country and across countries. This is done by focusing on housing finance in the United States, the United Kingdom, and France. Following the theoretical framework developed by Hyman P. Minsky, the paper focuses...

We develop a simple model of defaultable debt and rational bubbles in the price of an asset, which can be pledged as collateral in a competitive credit pool. When the asset pledgeability is low, the down payment is high, and bubble investment is unleveraged, as in a standard rational bubble...

Households are subject to substantial tail risk in individual labor income, and the amount of income risk fluctuates over the business cycle. This paper proposes a New Keynesian production-based asset pricing model where idiosyncratic labor income risk is a key source of priced risk in equity...

This article analyzes the effect of valuations-based capital requirements and concentration risk provisions on the risk-shifting response of the banking sector to monetary easing. It provides a closed economy DSGE model for the Euro zone with costly bank capital and two heterogeneous borrowers....

We revisit the evidence on real effects of uncertainty shocks in the context of interest rate uncertainty, which can be hedged in the swap market. We document that adverse movements in interest rate uncertainty predict significant slowdowns in real activity, at the aggregate and at the...

We study the macroeconomic consequences of financial market concentration in a complete markets economy with production. We propose a theory in which differences in preferences, productivity, and risk exposure generate gains from trade, but these gains are not fully realized because some large...

We study the effects of financial uncertainty on investment dynamics in the U.S. using a vector autoregression with drifting parameters and stochastic volatilities. We find time-varying negative effects of financial uncertainty shocks on investment. These effects have declined in the post-WWII...