This paper evaluates the macroeconomic and distributional effects of government bailout guarantees for Government Sponsored Enterprises (such as Fannie Mae and Freddy Mac) in the mortgage market. In order to do so we construct a model with heterogeneous, infinitely lived households and...

I structurally estimate an incomplete markets lifecycle model with endogenous labor supply, using data on the joint distribution of wages, hours and consumption. The model is successful at matching the evolution of both the first and second moments of the data over the lifecycle. The key...

We propose several connectedness measures built from pieces of variance decompositions, and we argue that they provide natural and insightful measures of connectedness among financial asset returns and volatilities. We also show that variance decompositions define weighted, directed networks, so...

Savage (1954) provided axioms on preferences over acts that were equivalent to the existence of an expected utility representation. We show that there is a continuum of other expected utility" representations in which for any act, the probability distribution over states depends on the...

Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or RiskMetrics. In contrast, we propose flexible methods that exploit recent developments in financial econometrics and are likely to produce more accurate risk assessments, treating...

Savage (1954) provided a set of axioms on preferences over acts that were equivalent to the existence of an expected utility representation. We show that in addition to this representation, there is a continuum of other .expected utility.representations in which for any act, the probability...

People often wonder why economists analyze models whose assumptions are known to be false, while economists feel that they learn a great deal from such exercises. We suggest that part of the knowledge generated by academic economists is case-based rather than rule-based. That is, instead of...

Dispersion of money balances among individuals is the basis for a range of policies but it has been abstracted from in monetary theory for tractability reasons. In this paper, we fill in this gap by constructing a tractable search model of money with a non-degenerate distribution of money...

We study the optimal provision of unemployment insurance (UI) over the business cycle. We consider an equilibrium Mortensen-Pissarides search and matching model with risk-averse workers and aggregate shocks to labor productivity. Both the vacancy creation decisions of firms and the search effort...

Spain has experienced many financial crises through its history. These financial crises have varied origins. However, they do have common threads. The current recession and subsequent debt crisis follow the same pattern. The fiscal and monetary policies of the Spanish government have played a...