We study the effects of tax shocks on the budget and external deficits for 16 industrialized countries over the post-1975 period. Our structural approach is based on a tractable small open-economy model where a tax cut innovation generates a budget deficit. In turn, the budget deficit affects...

We study the effects of U.S. monetary policy shocks on the bilateral exchange rate between the U.S. and each of the G7 countries. We also estimate deviations from uncovered interest rate parity and exchange rate pass-through conditional on these shocks. The analysis is based on a structural...

This paper estimates a structural vector autoregression model to assess the dynamic effects of terrorism on output and prices in Israel over the post-1985 period. Long-run restrictions are used to obtain an interpretation of the effects of terrorism in terms of aggregate demand and supply...

For post-1975 Canadian data, we document the joint behavior of output, the current account, and the interest differential at the business cycle frequency. We also interpret the joint behavior using a simple small open economy model. Our simple model assumes that agents have access to world...

This paper evaluates the international integration hypothesis, that is, that risk-adjusted anticipated returns are identical, even when financial instruments are traded in different countries. Under time-varying conditional volatility, this hypothesis is tested by verifying the equality between...

For the first time in the literature, this paper extends the CCAPM to establish the empirical relations between equity premia and state-dependent consumption and market risks. These relations are derived from a flexible, yet tractable, mixture distribution admitting the existence of two regimes,...

This paper analyzes the empirical relations between equity premia and state-dependent consumption and market risks. These relations are derived from a flexible specification of the CCAPM with mixture distribution, which admits the existence of two regimes. Focusing on the market return, we find...

This paper empirically investigates the following three questions: (i) Do stock returns respond to monetary policy shocks? (ii) Do stock returns alter the transmission mechanism of monetary policy? and (iii) Does monetary policy systematically react to stock returns? Existing research based on...