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This paper develops a macroeconomic model of the interaction between consumer debt and firm debt over the business cycle. I incorporate interest rate spreads generated by firm and household loan default risk into a real business cycle model. I estimate the model on US aggregate data. This allows...
Persistent link: https://www.econbiz.de/10015224144
Bond markets in emerging markets are illiquid as investors and issuers grapple with major microstructure and legal issues. The importance of bond markets as a source of finance has increased during the economic slowdown as companies diversified away from reliance on banks for funding and many...
Persistent link: https://www.econbiz.de/10015232187
How does heightened uncertainty affect the costs of raising finance through the bond market and through bank loans? Empirically, I find that a rise in uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending rates. This new stylized fact can be explained...
Persistent link: https://www.econbiz.de/10015256492
Is the Philips Curve Still Applicable in Today’s Financial Environment? The relationship between wage inflation and unemployment, is not only considered by Gali and Gambetti (2018:2) to be a “a key link of the relation between prices and economic activity” but also regarded as the focus of...
Persistent link: https://www.econbiz.de/10015264647
This paper studies the role of narratives for macroeconomic fluctuations. Microfounding narratives as directed acyclic graphs, we show how exposure to different narratives can affect expectations in an otherwise-standard macroeconomic framework. We identify such competing narratives in news...
Persistent link: https://www.econbiz.de/10015268144
Using an ensemble forecasting technique, we created the rule-based indicator (FKRI, the Fisher Knight Recession Indicator) that accurately predicted all five economic recessions in the United States during the last 45 years. The indicator gave neither type I nor type II errors (no false alarms...
Persistent link: https://www.econbiz.de/10015268783
In 1946 the economist Arthur Burns defined a business cycle as a period of expansion occurring about the same time in many economic activities, followed by similar general recessions, contractions and revivals, which merge into the expansion phase of the next cycle. Cycles may take from one year...
Persistent link: https://www.econbiz.de/10015246582
In the U.S. individual households have the freedom to borrow funds if they need to do so; other households have the freedom to offer their surplus funds to the financial markets. These simple freedoms hide the fundamental reality that these two types of households are in an unequal financial...
Persistent link: https://www.econbiz.de/10015248673
The three main economic philosophies (Classical, Keynesians and Monetarists) did not help in preventing the 2007-2008 U.S. financial crisis. Why not? The Classical economists focus on free markets, free of government interference and free of monopolies. They missed the point that when about $10...
Persistent link: https://www.econbiz.de/10015249090
The very fact that utility maximization in real business cycle and New Keynesian models is intertemporal suggests the possibility of a Fisherian intertemporal futures market, which is not state-contingent. Ex-ante speaking, the addition of a futures market does not result in any difference, but...
Persistent link: https://www.econbiz.de/10015250052