Adopting an asset-market view of international risk sharing, we identify various sources of macroeconomic risk faced by international investors using a structural Vector Autoregression model. We find that most of the risk of exogenous financial market shocks are shared by international investors through the existing asset markets. However, other macroeconomic risks such as those associated with...

This article discusses the impact of dollarization in Ecuador, Panama and El Salvador as well Argentine convertibility system. We found that adoption a more stable currency has had positive results those countries.
 Key words: Dollarization, Inflation, Central Bank, Balance Trade, Gold Standard, Cash Ratio, Exports, Flexible Exchange Rates.
 JEL Classification: E42, E44, E58.
 Re...

This paper revisits the time-series relation between the conditional risk premium and variance of the equity market portfolio. The main innovation is that we construct a measure of the ex ante equity market risk premium using corporate bond yield spread data. This measure is forward-looking and does not rely critically on either realized equity returns or instrumental variables. We find strong ...

We formulate a consumption-based asset pricing model in which aggregate risk aversion is time-varying in response to both news about consumption growth (as in a habit formation model) and news about inflation. We estimate our model and explore its pricing implications for the term structure of interest rates and the cross-section of stock returns. Our empirical results support the hypothesis th...

When a firm offers health benefits to workers, it exposes the firm to the risk of making payments when workers get sick. A firm can either pay health expenses out of its general assets, keeping the risk inside the firm, or it can purchase insurance, shifting the risk outside the firm. Using data on insurance decisions, we find that smaller firms, firms with more investment opportunities, and fi...

We discuss the characteristics of investment decisions and identify the factors that affect consumers’ information search behavior when they make investment decisions. Using the 2000 to 2001 MacroMonitor data set, we find that subjective knowledge, amount of investment, risk tolerance, age, education, and income influence both the extent of information search and the use of specific information...

This paper uses Hansen and Jagannathan’s (1991) volatility bounds to evaluate models with idiosyncratic consumption risk. I show that idiosyncratic risk does not change the volatility bounds at all when consumers have CRRA preferences and the distribution of the idiosyncratic shock is independent of the aggregate state. Following Mankiw (1986), I then show that idiosyncratic risk can help to en...

We consider an exchange economy under uncertainty, in which agents’ utility functions exhibit constant absolute risk aversion, but they may be recursive and the expected utility calculation may be based on multiple subjective beliefs. The risk aversion coefficients, subjective beliefs, subjective time discount factors, initial endowments, and tradeable assets may differ across agents. We prove ...

We build a general equilibrium model of investment and capital accumulation in emerging economies. The infinite horizon model features a financial friction, namely that entrepreneurs can only raise debt that they can credibly repay given an outside option such as an investment in the traditional sector of the emerging economy. We show that when lending rates are low, the pure market outcome can...

Drastic changes and turbulence in macro-economic factors have the greatest impact on banks target market attractiveness in Iran. It is assumed that conventional segmentation models at the corporate level are not efficient for banking system. This study aims to develop a new segmentation model at the industry level for banks of Iran. For this purpose, structures and variables at the industry lev...