At an aggregate level, formal default via bankruptcy and informal default via delinquency
are both quantitatively important in consumer credit markets. In this paper,
we use a variety of microeconomic data sources to construct a salient set of facts on
the use of unsecured debt and both formal and informal default.
What is the role of a country’s financial system in determining technology adoption? To examine
this, a dynamic contract model is embedded into a general equilibrium setting with competitive
This paper introduces a measure of credit score performance that abstracts from the influence of "situational factors." Using this measure, we study the role and effectiveness of credit scoring that underlied subprime securities during the mortgage boom of 2000-2006.
We study the contraction of foreign direct investment (FDI) flows in the United States during the recent financial crisis and show their unusual non-resiliency, which depends in part on the global nature of the economic recession, but also on the increases in the cost of financing FDI in the economies in which the flows originate.
Characterizing asset price volatility is an important goal for financial economists. The literature has shown that variables that proxy for the information arrival process can help explain and/or forecast volatility.
We examine the interaction between foreign aid and binding borrowing constraint for a recipient country. We also analyze how these two instruments affect economic growth via non-linear relationships. First of all, we develop a two-country, two-period trade-theoretic model to develop testable hypotheses and then we use dynamic panel analysis to test those hypotheses empirically. Our main findings are that: (i) better access to international credit for a recipient country reduces the amount of foreign aid it receives, and (ii) there is a critical level of international financial transfer, and the marginal effect of foreign aid is larger than that of loans if and only if the transfer (loans or foreign aid) is below this critical level.
This paper analyzes the empirical performance of two alternative ways in which multi-factor models with time-varying risk exposures and premia may be estimated. The first method echoes the seminal two-pass approach advocated by Fama and MacBeth (1973).
In 1936-37, the Federal Reserve doubled the reserve requirements imposed on member banks. Ever since, the question of whether the doubling of reserve requirements increased reserve demand and produced a contraction of money and credit, and thereby helped to cause the recession of 1937-1938, has been a matter of controversy.
This article introduces the subject of technical analysis in the foreign exchange market, with emphasis on its importance for questions of market efficiency. “Technicians” view their craft, the study of price patterns, as exploiting traders’ psychological regularities.
Regime switching models have been assuming a central role in financial applications because of their well-known ability to capture the presence of rich non-linear patterns in the joint distribution of asset returns.
We use a simple partial adjustment econometric framework to investigate the effects of the crisis on the dynamic properties of a number of yield spreads. We find that the crisis has caused substantial disruptions revealed by changes in the persistence of the shocks to spreads as much as by in their unconditional mean levels.
To address how technological progress in financial intermediation affects the economy, a costly state verification framework is embedded into the standard growth model. The framework has two novel ingredients.
Using data for a large number of advanced and emerging market economies during 1985-2009, this paper documents the dynamics of financial integration and assesses whether advances in financial integration and globalization yield the beneficial real effects resulting from a more efficient resource allocation predicted by theory.
Academic research relies extensively on macroeconomic variables to forecast the U.S. equity risk
premium, with relatively little attention paid to the technical indicators widely employed by practitioners. Our paper fills this gap by comparing the forecasting ability of technical indicators with that of macroeconomic variables.