This paper adapts climate-economy models that have been applied in other contexts for use in climate-related scenario analysis. We consider illustrative scenarios for the global economy that could generate economic and financial risks. Our results suggest there are significant economic risks from climate change and the move to a low-carbon economy.
Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment FluctuationThis paper identifies the aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 1.1% of the variation in U.S. public firms' aggregate investment.
We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence — contemporaneously and with a lag — the dynamics of the intercept and autoregressive coefficients in these models.
In this paper, we discuss whether the ability of individuals to convert commercial bank money (i.e., bank deposits) into central bank money is fundamentally important for the monetary system.
A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.
Given that the stochastic discount factor (SDF) from any equilibrium model has direct implications for yield curves, the historical dynamics of the US Treasury yield curve should tell us what a good SDF should look like from a historical perspective.
We study a novel policy tool—interest rate uncertainty—that can be used to discourage inefficient capital inflows and to adjust the composition of external account between shortterm securities and foreign direct investment (FDI).
Standard theories of price adjustment are based on the problem of a single-product firm, and therefore they may not be well suited to analyze price dynamics in the economy with multiproduct firms.
Consider markets for assets traded over the counter such as mortgage-backed securities and corporate bonds. Sellers in these markets may have more information on the value of their assets and their liquidity needs than buyers do. Also, sellers and buyers must search for trade partners, which is time-consuming and costly.