The equity risk premium (ERP) in BRIC markets is, on average, significantly higher than that in the US market. This paper employs an endowment economy with recursive preferences and long-run risk to explain the ERP generated by a portfolio of BRIC equity indices. The combination of recursive...

This paper contributes to the ongoing debate on the relationship between austerity measures and economic growth. We propose a general equilibrium model where (i) agents have recursive preferences; (ii ) economic growth is endogenously driven by investments in R&D; (iii) the government is...

This paper studies a two-country production economy with complete and frictionless financial markets and international trade of final goods in which competition in R&D leads to endogenous new firm creation and economic growth. Current monopolists ("incumbents") and potential new firms...

We analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher....

Germany entered the euro with a current account deficit but over the entire past decade has run large and persistent current account surpluses. Besides joining the common currency, the increase of Germany’s current account since the late 1990s has been accompanied by strong shifts in the...

The US–China data suggest that (i) the real exchange rate (RER) volatility puzzle (high RER volatility relative to consumption volatility), (ii) the Backus–Smith anomaly (negative correlation between the RER and consumption differentials), (iii) the consumption correlation puzzle (relatively...

This paper investigates the "education-total factor productivity trade-off" in explaining per worker income differences between Sub-Saharan (unlucky) and G7 (lucky) economies. Following Hall and Jones (1999) and Caselli (2005), on a country basis, we are able to study separately the dynamic of...

A canonical two country-two good model with standard preferences does not address three classic international macroeconomic puzzles as well as two well-known asset pricing puzzles. Specifically, under financial autarky, it does not account for the high real exchange rate (RER) volatility...

This paper studies the impact of changes in the dynamics ofthe correlation coefficients between asset returns on portfolio choices. Using weekly data from February 2002 to October 2011 on four different European asset classes, we obtain three main results. Firstly, we show that the 2007-2009...

This paper investigates the \education-total factor productivity trade-o " in explaining per worker income dierences between Sub-Saharan (unlucky) and G7 (lucky) economies. Following Hall and Jones (1999) and Caselli (2005), on a country basis, I am able to study separately the dynamic of the...