I analyze the risk of nominal assets within an external habit model supplemented with realistic non … to the risk of nominal assets. After matching standard properties of the US financial markets, I investigate if … macroeconomic shocks can reproduce time-varying stock and bond return correlations. Macroeconomic shocks generate sizable positive …

We build a model for bond yields based on a small-scale representation of an economy with secular declines in inflation … bond yields via the term premium. …

How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper … finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending … the value of the lending relationship and lowers the lending rate. Bond investors demand compensation for the increased …

In a standard incomplete markets model with a continuum of households that have constant relative risk aversion (CRRA …) preferences, the absence of insurance markets for idiosyncratic labor income risk has no effect on the premium for aggregate risk … if the distribution of idiosyncratic risk is independent of aggregate shocks and aggregate consumption growth is …

We present a theory in which limited risk sharing of idiosyncratic labor income risk plays a key role in determining … the dynamics of interest rates. Our production-based model relates the crosssectional distribution of labor income risk to … observable aggregate labor market variables. Our model makes two key predictions. First, it predicts positive risk premia for …