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This paper examines the effects of time-varying volatility on welfare. I construct a tractable endogenous growth model with recursive preferences, stochastic volatility, and capital adjustment costs.

Increased sovereign credit risk is often associated with sharp currency movements. Therefore, expectations of the probability of a sovereign default event can convey important information regarding future movements of exchange rates.

In this paper, we study the impact of Canada’s adoption of protectionist trade policy in 1879 on Canadian welfare. Under the National Policy the Canadian average weighted tariff increased from 14% to 21%. The conventional view is that this was a distortionary policy that negatively affected Canadian welfare.

The investment of foreign exchange reserves or other asset portfolios requires an assessment of the credit quality of investment counterparties. Traditionally, foreign exchange reserve and asset managers have relied on credit rating agencies (CRAs) as the main source for credit assessments.

The investment of foreign exchange reserves or other asset portfolios requires an assessment of the credit quality of counterparties. Traditionally, foreign exchange reserve managers and other investors have relied on credit rating agencies (CRAs) as the main source for credit assessments.

Multi-stage production is widely recognized as an important feature of the modern global economy. This feature has been incorporated into many state-of-the-art quantitative trade models, and has been shown to deliver significant additional gains from international trade.

We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions.

Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment.

Following the financial crisis, there has been increased regulatory focus on the management of liquidity in mutual funds and, specifically, whether funds hold enough liquidity to guard against the potential for investor runs.

We introduce a new approach for the estimation of high-dimensional factor models with regime-switching factor loadings by extending the linear three-pass regression filter to settings where parameters can vary according to Markov processes.