This paper provides an empirical test of the scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2011). This theory suggests that market participants may at times attach significantly more weight to individual economic fundamentals to rationalize the pricing of currencies, which...

We investigate the impact of long term investors' demand for UK index-linked gilts on the term structure of real rates for the 1987-2012 period. This is done by carrying out a structural estimation of the preferred-habitat model of Vayanos and Vila (2009). We use data on long-term investors'...

We develop a multivariate credit risk model for the term structures of sovereign and bank credit default swaps. First, we separate the probability of joint defaults of large Eurozone sovereigns (systemic risk) from that of sovereign-specific defaults (country risk). Then, we quantify individual...

We develop a multivariate credit risk model that accounts for joint defaults of banks and al-lows us to disentangle how much of banks' credit risk is systemic. We find that the US and UK dif-fer not only in the evolution of systemic risk, but in particular in their banks' systemic exposures. In...

This paper provides an empirical test of the scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2011), as an attempt to evaluate its potential for explaining the poor empirical performance of traditional exchange rate models. This theory suggests that market participants may at...

The scapegoat theory of exchange rates (Bacchetta and van Wincoop, 2004, 2013) suggests that market participants may attach excessive weight to individual economic fundamentals, which are picked as “scapegoats”to rationalize observed currency fluctuations at times when exchange rates are...

This paper investigates the systematic risk factors driving emerging market (EM) credit risk by jointly modeling sovereign and corporate credit spreads at a global level. We use a multi-regional Bayesian panel VAR model, with time-varying betas and multivariate stochastic volatility. This model...

This paper provides an empirical test of the scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2011), as an attempt to evaluate its potential for explaining the poor empirical performance of traditional exchange rate models. This theory suggests that market participants may at...