One explanation for the usefulness of financial variables as tools for economic forecasting is that they embody the expectations of economic agents about the future state of the economy. In this paper, we test whether interest rate volatility contains information on the expectations of agents...

This paper demonstrates that in macroeconomic models with nominal rigidities, a global solution exists that supports an alternate equilibrium where traditional Taylor rules give rise to self-fulfilling aggregate volatility and excess risk-premium. Within the rational expectations framework, we...

What is the source of interest rate volatility? Why do low interest rates precede business cycle booms? Most observers tend to assume that monetary policy is largely responsible for it. Indeed, a standard real business cycle model delivers rather small fluctuations in real interest rates. Here,...

Schumpeter’s notion of creative destruction assumes that volatile growth leads to a more efficient reallocation of resources and the adoption of new technologies. However, this can only occur if such productivity-enhancing opportunities are available within society. This availability is...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modelled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

Traditionally, observed fluctuations in aggregate economic time series have been mainly modeled as being the result of exogenous disturbances. A better understanding of macroeconomic phenomena, however, surely requires looking directly at the relations between variables that may trigger...

How does access to credit impact consumption volatility? Theory and evidence from advanced economies suggests that greater household access to finance smooths consumption. Evidence from emerging markets, where consumption is usually more volatile than income, indicates that financial reform...

We assess whether the euro had an impact first on the degree of integration of European financial markets, and, second, on the euro area term structure. We propose two methodologies to measure integration: one relies on time-varying GARCH correlations, and the other one on a regression...

A contribution to the study of volatility and country risk is made in order to achieve a successful crosscountry comparison. We present a methodology for the evaluation of country risk that include endogenous detection of multiple structural breaks (also identifying its different kinds),...

We analyze empirically the determinants of Eurozone Treasury bills yields. Market microstructure as well as macroeconomic variables are found to significantly impact yields. Secondary trading in a centralized transparent electronic limit order book enhances liquidity and thus reduce yields....