Under mild assumptions, the data indicate that fluctuations in nominal interest rate differentials across currencies are primarily fluctuations in time-varying risk. This finding is an immediate implication of the fact that exchange rates are roughly random walks. If most fluctuations in...

We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in postwar U.S. data and use it to uncover how the pricing kernel has moved with the short rate in this data. Our findings imply that standard monetary models miss an essential link...

This paper is the study of the dynamics of the efficient distribution of consumption in an exchange economy with many consumers, each of whom is subject to private, idiosyncratic taste shocks. The authors propose a recursive method for finding feasible allocations that are incentive-compatible...