The paper studies the relation between the US-Dollar/Euro exchange rate and US and euro area interest rates during normal and crisis times. We describe each asset price within a multifactor model and identify the causal contemporaneous relations through heteroskedasticity. We find that US rates...

How does bankruptcy affect the dynamics of aggregate consumption? We quantify the trade-off between the insurance and creditworthiness effects of bankruptcy in response to tighter credit. We show that bankruptcy dampens the effect of tighter credit on aggregate consumption on impact because it...