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The term structure of risk premia: new evidence from the financial crisis

Berg, Tobias - 2010

This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk...

Persistent link: https://www.econbiz.de/10011605211

How far are we from the slippery slope? The Laffer curve revisited

Trabandt, Mathias; Uhlig, Harald - 2010

”constant Frisch elasticity” (CFE) preferences. We derive properties of CFE preferences. We provide new tax rate data. For …

Persistent link: https://www.econbiz.de/10011605220

Econometric analysis of high dimensional VARs featuring a dominant unit

Pesaran, Hashem; Chudik, Alexander - 2010

This paper extends the analysis of infinite dimensional vector autoregressive models (IVAR) proposed in Chudik and Pesaran (2010) to the case where one of the variables or the cross section units in the IVAR model is dominant or pervasive. This extension is not straightforward and involves...

Persistent link: https://www.econbiz.de/10011605240

Reputational contagion and optimal regulatory forbearance

Morrison, Alan D.; White, Lucy - 2010

This paper examines common regulation as cause of interbank contagion. Studies based on the correlation of bank assets and the extent of interbank lending may underestimate the likelihood of contagion because they do not incorporate the fact that banks have a common regulator. In our model, the...

Persistent link: https://www.econbiz.de/10011605242

Epstein-Zin preferences and their use in macro-finance models: implications for optimal monetary policy

Darracq Pariès, Matthieu; Loublier, Alexis - 2010

Epstein-Zin preferences have attracted significant attention within the macro-finance literature based on DSGE models … an ad hoc loss function under commitment. However, Epstein-Zin preferences may have significant quantitative implications …, the paper focuses on the impact of such preferences on the Ramsey approach to monetary policy within a medium-scale model …

Persistent link: https://www.econbiz.de/10011605255

Monetary policy and capital regulation in the US and Europe

Cohen-Cole, Ethan; Morse, Jonathan - 2010

From the onset of the 2007-2009 crisis, the Federal Reserve and the European Central Bank have aggressively lowered interest rates. Both sets of changes are at odds with an anti-inflationary stance of monetary policy; indeed, as the crisis began in August 2007 inflation expectations were high...

Persistent link: https://www.econbiz.de/10011605268

The dark side of bank wholesale funding

Huang, Rocco; Ratnovski, Lev - 2010

Banks increasingly use short-term wholesale funds to supplement traditional retail deposits. Existing literature mainly points to the "bright side" of wholesale funding: sophisticated financiers can monitor banks, disciplining bad but refinancing good ones. This paper models a "dark side" of...

Persistent link: https://www.econbiz.de/10011605269

A note on identification patterns in DSGE models

Andrle, Michal - 2010

This paper comments on selected aspects of identification issues of DSGE models. It suggests the singular value decomposition (SVD) as a useful tool for detecting local weak and non-identification. This decomposition is useful for checking rank conditions of identification, identification...

Persistent link: https://www.econbiz.de/10011605281

Optimal monetary policy with state-dependent pricing

Nakov, Anton; Thomas, Carlos - 2010

We study optimal monetary policy in a flexible state-dependent pricing framework, in which monopolistic competition and stochastic menu costs are the only distortions. We show analytically that it is optimal to commit to zero inflation in the long run. Moreover, our numerical simulations...

Persistent link: https://www.econbiz.de/10011605296

Credit risk transfers and the macroeconomy

Faia, Ester - 2010

The recent financial crisis has highlighted the limits of the "originate to distribute" model of banking, but its nexus with the macroeconomy and monetary policy remains unexplored. I build a DSGE model with banks (along the lines of Holmström and Tirole [28] and Parlour and Plantin [39]) and...

Persistent link: https://www.econbiz.de/10011605302