Related papers: The Interaction Between Credit Constraints and Unc…
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
We empirically test the effects of unanticipated fiscal policy shocks on the growth rate and the cyclical component of real private output and reveal different types of asymmetries in fiscal policy implementation. The data used are…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…
We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
This paper investigates how the cost of public debt shapes fiscal policy and its effect on the economy. Using U.S. historical data, I show that when servicing the debt creates a fiscal burden, the government responds to spending shocks by…
The instability of the financial system as experienced in recent years and in previous periods is often linked to credit defaults, i.e., to the failure of obligors to make promised payments. Given the large number of credit contracts, this…
We study how idiosyncratic firm-level shocks generate aggregate volatility and tail risk when they propagate through a production network under overlapping adjustment: new productivity draws arrive before the economy reaches the static…
Context. Monte Carlo methods can be used to evaluate the uncertainty of a reaction rate that arises from many uncertain nuclear inputs. However, until now no attempt has been made to find the effect of correlated energy uncertainties in…
Recent studies highlight economic complexity's role in mitigating fiscal crises, often measured via an economy's trade structure. Trade, however, is just one facet of an economy's structure and omits critical innovative activities like…
Physical concepts developed to describe instabilities in traffic flows can be generalized in a way that allows one to understand the well-known instability of supply chains (the so-called ``bullwhip effect''). That is, small variations in…
In the General Theory, Keynes remarked that the economy's state depends on expectations, and that these expectations can be subject to sudden swings. In this work, we develop a multiple equilibria behavioural business cycle model that can…
We empirically investigate the distributional effects of inflation on workers' unemployment tail risks using instrumental variable quantile regression. We find that supply-driven inflation disproportionately raises unemployment tail risks…
We study a simple, solvable model that allows us to investigate effects of credit contagion on the default probability of individual firms, in both portfolios of firms and on an economy wide scale. While the effect of interactions may be…
We study the relaxation dynamics of the bid-ask spread and of the midprice after a sudden, large variation of the spread, corresponding to a temporary crisis of liquidity in a double auction financial market. We find that the spread decays…
In this comment we discuss the problem of reconciling the linear efficiency of price returns with the long-memory of supply and demand. We present new evidence that shows that efficiency is maintained by a liquidity imbalance that co-moves…
We introduce a new identification strategy for uncertainty shocks to explain macroeconomic volatility in financial markets. The Chicago Board Options Exchange Volatility Index (VIX) measures market expectations of future volatility, but…
Physical risks, such as droughts, floods, rising temperatures, earthquakes, infrastructure failures, and geopolitical conflicts, can ripple through global supply chains, raising costs, and constraining production across industries.…
There is great uncertainty about future climate conditions and the appropriate policies for managing interactions between the climate and the economy. We develop a multidimensional computational model to examine how uncertainties and risks…