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Trade with asymmetric information
Events in financial markets before and during the crisis of late 2008 have stimulated renewed interest in modeling trade with asymmetric information. Robert Shimer’s contribution to this volume joins the literature focusing on trade in securities that are claims on mortgages where issuers of the ...
Revisiting overborrowing and its policy implications
Economies with imperfect financial market access may experience crises that cause significant economic dislocation. These crises are characterized by the sudden stop of domestic or international credit flows and they are associated with large declines in consumption output relative prices and asset ...
Equity market spillovers in the Americas
Many aspects of financial markets merit monitoring in risk management and portfolio allocation contexts, including (and perhaps especially) in contexts of interest to central banks. Much recent attention, for example, has been devoted to measuring and forecasting return volatilities and correlations, ...
Defining finacial stability and establishing a framework to safeguard it
The ongoing global financial crisis has been a rude awakening that the current framework for safeguarding financial stability is neither reliable nor effective. The threats to global economic stability caused by the dysfunction of credit and money markets and the weakening of the global banking system ...
Risk premium shifts and monetary policy: a coordination approach
Our understanding of crisis propagation and the telling of the crisis narrative have been heavily influenced by the events surrounding the 2008 crisis which has focused on the leverage of banks and other financial intermediaries. Since then the focus has shifted from banks to financial market liquidity ...
Leverage restrictions in a business cycle model: a comment
The paper by Christiano and Ikeda in this volume is one of the first efforts to quantify the welfare gains of leverage constraints in a macroeconomic model with a banking sector. Unlike other models their answer is that they can be even more desirable when banks hold little equity and intermediation ...
Leverage restrictions in a business cycle model
We seek to develop a business cycle model with a financial sector which can be used to study the consequences of policies to restrict the leverage of financial institutions (banks). Because we wish the model to be consistent with basic features of business cycle data we introduce our banking system ...
Private information in the mortgage market: evidence and a theory of crises
The securitization boom in the United States mortgage market from 2000 to 2005 was enormous (figure 1). According to the Securities Industry and Financial Markets Association (SIFMA) new issuance of securities backed by mortgages that were not insured by the U.S. government rose by a factor of twelve ...
Pegs downward wage rigidity and unemployment: the role of financial structure
A characteristic of the current crisis in Europe is that countries in its periphery have found themselves increasingly cut off from international financial markets. In the present study we ask how such changes in the financial structure influence the welfare consequences of maintaining a fixed exchange ...
Monetary policy responses to external spillovers in emerging market economies
Despite the remarkable progress made in many emerging and middle-income economies over the last few decades the continuing liberalization in financial markets and the integration into the global financial system these countries remain highly vulnerable to real and financial shocks coming from the U.S. ...