This paper argues that political polarization plays a key role in shaping the economic expectations and consumption behavior of households. Using a combination of survey and consumption data of U.S. households, we document five facts. First, household beliefs are well-described by a single...

We develop a two-country model in which currency and bond markets are populated by different investor clienteles, and segmentation is partly overcome by global arbitrageurs with limited capital. Our model accounts for the empirically documented violations of Uncovered Interest Parity (UIP) and...

To understand the effects of large-scale asset purchase programs recently implemented by central banks, we study how markets absorb large demand shocks for risk-free debt. Using high-frequency identification, we exploit the structure of the primary market for U.S. Treasuries to isolate demand...