We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable “salary”...

How should monetary authorities react to an oil price shock? The New Keynesian literature has concluded that ensuring perfect price stability is optimal. Yet, the contrast between theory and practice is striking: Inflation targeting central banks typically favor a longer run approach to price...

This study examines the behavior of Swiss house prices to immigration flows for 85 districts from 2001 to 2006. The results show that the nexus between immigration and house prices holds even in an environment of low house price inflation, nationwide rent control, and modest immigration flows....

Do immigrants have a higher demand for large denominated banknotes than natives? This micro study examines whether cash orders for CHF 1,000 notes, a banknote used for storage purposes, is concentrated in Swiss municipalities with a high foreign-to-native ratio. Controlling for a range of...

In modelling and forecasting volatility, two main trade-offs emerge: mathematical tractability versus economic interpretation and accuracy versus speed. The authors attempt to reconcile, at least partially, both trade-offs. The former trade-off is crucial for many financial applications,...

We examine the firm- and country-level determinants of the currency denomination of small business loans. We first model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs, and also examines the impact of...

The standard economy-wide indices of labor quality (or human capital) largely ignore the role of unobservable worker characteristics. In this paper, we develop a methodology for identifying the contributions of both observable and unobservable worker characteristics in the presence of the...

Nominal and real U.S. interest rates (1997Q1-2008Q2) are combined with inflation expectations from the Survey of Professional Forecasters to calculate time series of risk premia. It is shown that survey data on inflation and output growth uncertainty, as well as a proxy for liquidity premia can...

A procedure that has been used at the Swiss National Bank for selecting vector-autoregressive (VAR) models in order to forecast Swiss consumer price inflation is presented. In order to examine and improve the quality of the procedure, it is submitted to several modifications and the results are...

Studies on the role of the credit channel have flourished in recent years. This paper focuses on the work that has been carried out using Swiss data. It begins with some general features characterizing the credit channel and demonstrating its empirical implications. It then provides an overview...