The sign of the relationship between expected stock market returns and volatility appears to vary over time, a result that seems at odds with basic notions of risk and return. In this paper we construct an economy where production involves the use of both labor and capital as inputs. We show...

In the current regulatory framework, capital requirements are based on risk-weighted assets, but all business loans carry a uniform risk weight, irrespective of variations in credit risk. The proposed new Capital Accord of the Bank for International Settlements provides for a greater sensitivity...

The sign of the relationship between expected stock market returns and volatility appears to vary over time, a result that seems at odds with basic notions of risk and return. In this paper we construct an economy where production involves the use of both labor and capital as inputs. We show...

We employ intranational data for the United States from 1978-1991 to re-explore two discrepancies between international real business cycle models and data (so called 'anomalies') that have been highlighted by Backus, Kehoe and Kydland (1993). The benefit to our approach is that the analysis of...

Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks’ capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap...

Remarks at the IIF Annual Meeting of Latin America Chief Executives, Santiago, Chile.

Using quarterly financial statements and stock market data from 1982 to 2010 for the six largest Canadian chartered banks, this paper documents positive co-movement between Canadian banks’ capital buffer and business cycles. The adoption of Basel Accords and the balance sheet leverage cap...

This paper studies the nature of business cycle variation in individual earnings risk using a confidential dataset from the U.S. Social Security Administration, which contains (uncapped) earnings histories for millions of individuals. The base sample is a nationally representative panel...

A real business cycle model with heterogeneous agents is parameterized, calibrated, and simulated to see if it can account for some stylized facts characterizing postwar U.S. business cycle fluctuations, such as the countercyclical movement of labor’s share of income, and the acyclical...

We study the macroeconomic implications of the debt overhang distortion. In our model, the distortion arises because investment is non-contractible—when a firm borrows funds, the debt contract cannot specify or depend on the firm’s future level of investment. After the debt contract is...