This paper develops methods and a framework of financial market theory. We model financial markets as a system of agents which perform market transactions with other agents under the action of numerous expectations. Agents' expectations are formed of economic and financial variables, market...

This paper develops methods and a framework of financial market theory. We model financial markets as a system of agents which perform market transactions with other agents under the action of numerous expectations. Agents’ expectations are formed of economic and financial variables, market...

We model aggregate loss rates on credit portfolios dynamically using a default intensity approach. The default intensity we employ is allowed to depend on both observable macroeconomic variables and unobserved frailties. We use the model to extract measures of the credit cycle from US bank...

This paper develops a structural macroeconometric model of the world economy, disaggregated into thirty five national economies. This panel unobserved components model features a monetary transmission mechanism, a fiscal transmission mechanism, and extensive macrofinancial linkages, both within...

We study scar formation and persistence after a house price bubble has burst using data on 3,089 US counties and county equivalents over the period 1980q1-2019q4. We date house price booms and busts for each county, and identify periods with explosive house price developments. Applying a sharp...

I explore the macroeconomic implications of borrowers facing both loan-to-value (LTV) and debt-service-to-income (DTI) limits, using an estimated DSGE model. I identify when each constraint dominated over the period 1984-2019: LTV constraints dominate in contractions, when house prices are...

I build a DSGE model where households face two occasionally binding credit constraints: a loan-tovalue (LTV) constraint and a debt-service-to-income (DTI) constraint. From an estimation of the model, I infer when each constraint was binding over the 1975-2017 timespan. The LTV constraint often...

We show that US financial uncertainty has nonlinear spillover effects on the conditional distribution of forecasted GDP growth worldwide. This nonlinearity stems from asymmetric responses of domestic and international credit conditions following a US financial uncertainty shock. Through the...

This study examines the predictive ability of various risk aversion indicators for future real economic activity (REA). Theoretically, the consumption capital asset pricing model and real business cycle model framework explain the role of the investor’s risk aversion. However, we show that...