We study variations in the risk-neutral distributions of the exchange rates in Brazil, Chile, Colombia, Mexico, and Peru due to interventions implemented by these countries. For this purpose, we first estimate the risk-neutral densities of the exchange rates based on derivatives market data, for...

Our interest is to understand the costs of deflation. Thus, we explore the extent to which deflationary risks have surged in a selected set of European economies. To that end, we develop a simple consumption-based asset pricing model and, based on it, we estimate a(n) (in)deflation risk premium....

Our note has two related, albeit separate, goals. First, we extend an interest rate policy rule by appending a financial variable to it. Our key assumption is that the relationship between that financial variable and output is uncertain. This is an important assumption because policymakers seek...

We are seeking to understand the costs of deflation. To that end, we assess the extent to which deflationary risks have surged in a selected group of European economies. Specifically, we develop a simple consumption-based asset pricing model and, based on it, we estimate a(n) (in)deflation risk...

There is an ongoing debate about austerity and stimulus in the Euro zone. Moreover, given the fiscal and financial problems in the region, a default has appeared likely at times. In this context, this paper develops a dynamic stochastic quantitative model of sovereign default with fiscal policy,...