I estimate the effects of the Federal Reserve's forward guidance and large-scale asset purchases, along with the effects of interest rate changes under conventional policy, on the U.S. equity market, and assess the reasons for stock price responses. Although the overall stock market respond...

We compare the performance of markets and tournaments as allocative mechanisms in an economy with borrowing constraints. The model consists of a continuum of individuals who differ in their initial wealth and ability level (e.g. students) and that are to be assigned to a continuum of investment...

This paper examines the detrimental consequences of financial market imperfections for international trade. I develop a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability. Applying this model to aggregate trade...

This paper surveys recent empirical work on tests for liquidity constraints.The focus of the survey is on the tests based on the Euler equation. After examining the technical aspects of the recent tests on aggregate time-series data and on micro data, the survey tries to evaluate their economic...

We propose debt-wealth constraints to separate all households into constrained and unconstrained groups. A constrained household is subject to debt payment dues with limited wealth. However, an unconstrained family has cash reserves. Since cash reserves can absorb investment losses, only...

Fiscal procyclicality, meaning co-movement between government expenditure and macroeconomic fundamentals, is an important feature of business cycle dynamics for emerging and poor economies. I estimate a panel SVAR to investigate the reasons for fiscal procyclicality. The analysis sheds light on...

This paper studies the effects of the mandatory implementation of a more informative disclosure regime on firms’ financial constraints and investment policies. I run a difference-in-difference analysis and find that firms moving from a voluntary use of the regime to a mandatory use increase...

Volume-based liquidity ratios suffer from potential measurement bias due to share restriction and may misrepresent actual liquidity. In this paper, we develop a modified metric, the free-float liquidity ratio. We argue that this measure is better suited to estimate liquidity in the presence of...

This paper develops and tests a new set of stochastic implications of optimal consumption behavior in the presence of borrowing constraints. In a departure from previous models, the theory shows that liquidity constraints imply a distinctive intertemporal relationship between durable and...

Countries around the world are working hard to fight against the economic crisis caused by the coronavirus pandemic, with a special emphasis on small- and medium-sized enterprises (SMEs) due to their vulnerability and importance in the business ecosystem. This paper analyzes the Spanish...