We introduce a novel method for measuring economic uncertainty at the firm, sector, and aggregate levels using sales volatility and validate it by comparison with existing macroeconomic uncertainty measures. We use Compustat firms data in the period 2000-2022 to construct our uncertainty...

Using granular data from the Spanish Central Credit Register, we study the contagion of financial distress via the credit quality channel in the Spanish interbank market. We propose a non-linear contagion mechanism dependent on banks’ balance-sheet structure (specifically, their leverage...

Supply chain disturbances can lead to substantial increases in production costs. To mitigate these risks, firms may take steps to reduce their reliance on volatile suppliers. We construct a model of endogenous network formation to investigate how these decisions affect the structure of the...

This Article suggests a link between insider trading regulation and macroeconomic risk. Current securities laws do not explicitly prohibit a company insider from trading in the stocks of her company’s suppliers, customers, competitors, and complementors (based on material, non-public...

We construct novel proxies of physical and transition climate risks by conducting textual analysis of climate-change news over the period 2000-2018. This analysis uncovers four textual variables related to the topics of U.S. climate policy, international summits, natural disasters, and global...

This chapter puts forward a manual for how to setup and solve a continuous time model that allows to analyze endogenous (1) level and risk dynamics. The latter includes (2) tail risk and crisis probability as well as (3) the Volatility Paradox. Concepts such as (4) illiquidity and liquidity...

This paper examines how monetary policy affects the riskiness of the financial sector's aggregate balance sheet, a mechanism referred to as the risk channel of monetary policy. I study the risk channel in a DSGE model with nominal frictions and a banking sector that can issue both outside equity...

I investigate whether the popular Krusell and Smith algorithm used to solve heterogeneousagent economies with aggregate uncertainty and incomplete markets is likely to be subject to multiple self-fulfilling equilibria. In a benchmark economy, the parameters representing the equilibrium aggregate...

I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since...

We analyze the theoretical moments of a nonlinear approximation to a model of business cycles and asset pricing with stochastic volatility and recursive preferences. We find that heteroskedastic volatility operationalizes a time-varying risk adjustment channel that induces variability in...