I study a two-country version of the banking model with financial markets developed in Allen and Gale (2004). Similar to their model, two types of banks arise endogenously in an autarkic economy: some always remain solvent and others can default. When the financial markets are integrated, three...

We build a two-country heterogenous-agent non-Ricardian model featuring asset scarcity and financial frictions in international capital markets. Due to the non-Ricardian nature of our framework, a demand for liquidity emerges and the supply of bonds matters. We show that shocks affecting the...

Monetary policy shocks that convey new macroeconomic information are significant predictors of both the absolute and risk-adjusted returns from value investing. Positive Fed information shocks lead to higher subsequent value returns. Crashes in the returns of value investing are most likely to...

There are several widely used benchmark models of the long-term interest rate in quantitative finance. However, these models have yet to incorporate Keynes's valuable insights about interest rate dynamics. The Keynesian approach to interest rate dynamics can be readily incorporated in the...

Every monetary policy decision by the Reserve Bank of New Zealand (RBNZ) is accompanied by a written statement about the state of the economy and the policy outlook, but only every second decision by a published interest rate forecast. We exploit this difference to study the relative influences...

Using panel data models, we analyze the flypaper effects-whether intergovernmental fiscal transfers or states' own income determine expenditure commitments - on ecological fiscal spending in India. The econometric results show that the unconditional fiscal transfers, rather than the states' own...

John Maynard Keynes (1930) asserted that the central bank sways the long-term interest rate through the influence of its policy rate on the short-term interest rate. Recent empirical research shows that Keynes's conjecture holds for long-term Treasury yields in the United States. This paper...

We use survey expectations about future monetary policy to decompose excess returns on fed funds futures and overnight index swaps into a term premium and an expectation error component. We find that excess returns are primarily driven by expectation errors, while term premia are economically...

We identify frictions in the market for liquidity as well as bank-specific and market-wide factors that affect the prices that banks pay for liquidity, captured here by borrowing rates in repos with the central bank and benchmarked by the overnight index swap. We have price data at the...

We compare the effectiveness of Federal Reserve's asset purchase programs in lowering long term yields with that of similar programs implemented by the Bank of England, the Swedish Riksbank, and the Swiss National Bank's reserve expansion program. We decompose government bond yields into (i) an...