The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States.
: Econometric and statistical methods; Financial stabilityThis paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities.
: Asset Pricing; Economic modelsA longstanding finding in the forecasting literature is that averaging forecasts from different models often improves upon forecasts based on a single model, with equal weight averaging working particularly well. This paper analyzes the effects of trimming the set of models prior to averaging.
: Econometric and statistical methodsThis paper proposes a novel regression-based approach to the estimation of Gaussian dynamic term structure models that avoids numerical optimization.
: Asset Pricing; Econometric and statistical methods; Interest ratesThis paper examines the contributions of population aging, mortgage innovation and historically low interest rates to the sharp rise in U.S. house prices and mortgage debt between 1994 and 2005.
: Asset Pricing; Credit and credit aggregates; Economic modelsUsing BoC-GEM-Fin, a large-scale DSGE model with real, nominal and financial frictions featuring a banking sector, we explore the macroeconomic implications of various types of countercyclical bank capital regulations. Results suggest that countercyclical capital requirements have a significant stabilizing effect on key macroeconomic variables, but mostly after financial shocks.
: Economic models; Financial Institutions; Financial stability; International topicsConsider the monetary model of Lagos and Wright (JPE 2005) but with general preferences and general production. I show that preferences satisfying UXXUHH – (UXH)2 = 0 is a sufficient condition for the existence and uniqueness of monetary equilibrium with degenerate money distribution.
: Economic modelsThis paper provides a framework to compare linked and unlinked CCP configurations in terms of total netting achieved by market participants and the total system default exposures that exist between participants and CCPs.
: Payment clearing and settlement systemsWe examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass-through.
: Inflation and prices; Transmission of monetary policyThis paper presents a general equilibrium model with endogenous collateral constraints to study the relationship between financial development and business cycle fluctuations in a cross-section of economies with different sizes of their financial sector.
: Credit and credit aggregates; Financial stabilityDuring the recent financial crisis in the U.S., banks reduced new business lending amidst concerns about borrowers’ ability to repay. At the same time, firms facing higher borrowing costs alongside a worsening economic outlook reduced investment.
: Business fluctuations and cycles; Economic models; Financial stabilityThis paper examines the relationship between house prices and consumption, through the use of debt. Using unique Canadian household-level data that reports the uses of debt, we begin by looking at the relationship between house prices and debt.
: Credit and credit aggregates; Domestic demand and componentsWe study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas.
: Inflation and prices; Monetary policy framework; Transmission of monetary policy
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