I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they account for up to 31% of the variation in excess bond...

This article explores the macroeconomic role that risk plays using the BAA-AAA spread as the measure of risk. First, it shows that meaningful upward movements in this spread are associated with recessions and their severity. Second, it includes the BAA-AAA spread in a structural...

Uncertainty about monetary policy associated with uncertainty in interest rate is an important determinant of economic decisions. Due to the dominant position of the US economy on global financial markets, in addition to countries' own uncertainties, uncertainty related to the monetary policy of...

We document a substantial increase in downside risk to US economic growth over the last 30 years. By modelling secular trends and cyclical changes of the predictive density of GDP growth, we find an accelerating decline in the skewness of the conditional distributions, with significant,...

This paper shows that monetary policy does and should respond systematically to time variation in ex-ante uncertainty and heterogeneity in private sector's views over the business cycle. Empirical tests are initially conducted on the basis of an augmented forward-looking Taylor rule framework,...

We explore empirically how the time-varying allocation of credit across firms with heterogeneous credit quality matters for financial stability outcomes. Using firm-level data for 55 countries over 1991-2016, we show that the riskiness of credit allocation, captured by Greenwood and Hanson...

This paper presents a simulative model of a financial market, based on a fully operating order book with limit and market orders. The heterogeneity of traders is characterized not only with regards to their trading rules, but also by introducing a behavioral individual risk aversion and a...

This paper examines the relation between variations in perceived inflation uncertainty and bond premia. Using the subjective probability distributions available in the Survey of Professional Forecasters we construct a quarterly time series of average individual uncertainty about inflation...