During emerging market crises, domestic agents might have sufficient collateral to borrow from the other domestic agents, but they are unable to borrow from foreigners because the country, as a whole, lacks international collateral. In this setting, we show that an (ex-post) optimizing central...

The last few years have seen a significant re-evaluation of the models used to analyze crises in emerging markets. Recent models typically stress financial constraints or distorted financial incentives. While this certainly represents progress, these models share a weakness with the earlier...

The recently developed long-run risks asset pricing model shows that concerns about long-run expected growth and time-varying uncertainty (i.e., volatility) about future economic prospects drive asset prices. These two channels of economic risks can account for the risk premia and asset price...

This is a theoretic and econometric assessment of Peter Ferderer’s seminal paper published in the Journal of Post Keynesian Economics with the same title in 1993. New data shows that high forecaster discords coincide with a decrease in Investment expenditure. Specifically, the forecaster...

In this paper, we take a critical look at the relationship between the value of capital stock in the Indian corporate sector and the valuation of claims to this capital stock in capital markets. We address the question of whether Indian equity valuations over the period 1991- 2008 are consistent...

We show that bond risk-premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these two uncertainty measures is similar to that by multiple yields. Motivated by this evidence, we develop and estimate a...

Which are the main frictions and the driving forces of business cycle dynamics in an open economy? To answer this question we extend the standard new Keynesian model in three dimensions: we incorporate financing frictions for capital, employment frictions for labor and extend the model into a...

This paper builds a dynamic stochastic general equilibrium (DSGE) model for Latvia that would be suitable for policy analysis and forecasting purposes at Latvijas Banka. For that purpose, the DSGE model with financial frictions of Christiano, Trabandt and Walentin (2011) is adapted to Latvia's...

We provide an empirical evaluation of the forward-looking long-run risks (LRR) model and highlight model differences with the backward-looking habit based asset pricing model. We feature three key results: (i) Consistent with the LRR model, there is considerable evidence in the data of...

Which are the main frictions and driving forces of business cycle dynamics in a small open economy? To answer this question we extend what is becoming the standard new Keynesian model in three dimensions. First, we incorporate frictions in the financing of the capital stock. Second, we model...