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Papers
OPTIMAL ISSUANCE FOR PROOF-OF-STAKE BLOCKCHAINS,
(Sept 2024)
A basic framework for evaluating issuance curves PERPETUAL FUTURES PRICING,
with Damien Ackerer and Julien Hugonnier (Updated Sept 2024)
No-arbitrage pricing for various contracts with some closed-form expressions PERPETUAL FUTURES PRICING: BASIC FORMULA, one-page version A MACRO FINANCE MODEL FOR PROOF-OF-STAKE ETHEREUM, (Updated Feb 2024), SLIDES
Money supply, fees, staking share, and price of the new Ethereum TOKENOMICS: MONETARY AND FEE POLICIES,
with Haotian Xiang (Updated June 2024)
Monetary policies of about 2,000 tokens and optimal policies for crypto assets with different levels of commitment RULES VERSUS DISCRETION IN CAPITAL REGULATION,
with Haotian Xiang (Revised Aug 2024)
Regulators' commitment matters for optimal bank capital regulation GOLD'S VALUE AS AN INVESTMENT, (Revised August 2024, forthcoming Review of Financial Studies)
An approach for pricing gold from investors’ perspective. Gold prices and real interest rates NON-SOVEREIGN STORES OF VALUE, (Revised April 2022, subsumed in Gold's value as an Investment)
Model for investor adoption and pricing with application to gold THE PRICING OF U.S. TREASURY FLOATING RATE NOTES, with Jonathan Hartley
(Journal of Financial Economics, Volume 155, May 2024 )
Treasury FRNs have paid excessively high interest rates over the last decade DYNAMIC BANKING WITH NON-MATURING DEPOSITS, with Haotian Xiang (Journal of Economic Theory, Volume 209, April 2023, 105644)
A model for the endogenous maturity of bank deposits INTEREST RECEIVED BY BANKS DURING THE FINANCIAL CRISIS: LIBOR VS HYPOTHETICAL SOFR LOANS, (Journal of Financial Services Research, 2023)
Estimates of the additional interest banks received due to LIBOR IS SOFR BETTER THAN LIBOR?, (March 2019)
A model is developed to study the transition from LIBOR to SOFR THE TWO-PILLAR POLICY FOR THE RMB, with Bin Wei and Vivian Yue (Journal of Finance, 2022)
We document China’s recent exchange rate policy and estimate a model capturing financial markets’ views about that policy CRYPTOCURRENCIES AND CAGAN’S MODEL OF HYPERINFLATION, (Journal of Macroeconomics, 2021, Volume 69)
The drivers of the prices of Bitcoin and Ethereum are studied within a framework based on Cagan’s model of hyperinflation. NEGATIVE SWAP SPREADS AND LIMITED ARBITRAGE, SLIDES, (The Review of Financial Studies, Volume 33, Issue 1, January 2020, Pages 212–238, https://doi.org/10.1093/rfs/hhz030)
Since October 2008 fixed rates for interest rate swaps with a thirty year maturity have been mostly below treasury rates with the same maturity. This paper presents a model for pricing long-term interest rate swaps where frictions for holding bonds limit arbitrage. FINANCIAL MARKETS' VIEWS ABOUT THE EURO-SWISS FRANC FLOOR, (2017, Journal of Money, Credit and Banking, Vol 49 Issue 2-3, 553-565)
Exchange rates and option prices incorporate market participants’ views about the credibility and the effects of exchange rate targets. I present a model to determine exchange rates under policy targets that can be used to price options. The model is estimated with Euro-Swiss Franc exchange rate and options price data. APPENDIX FORECASTING THE OUTCOME OF THE SWISS GOLD INITIATIVE, (November 16, 2014); UPDATE: NOV 24 STICKY LEVERAGE, joint with Joao Gomes and Lukas Schmid (2016, American Economic Review, Volume 106 No 12, December, 3800–3828)
We develop a tractable general equilibrium model that captures the interplay between nominal long term corporate debt, inflation, and real aggregates. INTEREST RATE SWAPS AND CORPORATE DEFAULT, with Vivian Y. Yue (Journal of Economic Dynamics and Control, Volume 88, March 2018, Pages 104-120)
This paper studies firms' usage of interest rate swaps to manage risk in a model economy driven by aggregate productivity shocks, inflation shocks, and counter-cyclical idiosyncratic productivity risk. A PRODUCTION-BASED MODEL FOR THE TERM STRUCTURE, SLIDES, (2013, Journal of Financial Economics, Volume 109, August, 293–306)
This paper considers the term structure of interest rates implied by a production-based asset pricing model in which the fundamental drivers are investment in equipment and structures as well as inflation. PAYING MORE ATTENTION TO FINANCIAL SHOCKS, joint with V. Quadrini (September 2009); VOX article describing some of our recent research.
MACROECONOMIC EFFECTS OF FINANCIAL SHOCKS, APPENDIX, joint with V. Quadrini (2012, American Economic Review, 102(1): 238–271)
We develop a model with debt and equity financing to explore how the dynamics of real and financial variables are affected by `financial shocks'. FINANCIAL INNOVATIONS AND MACROECONOMIC VOLATILITY, joint with V. Quadrini (April 2009)
The volatility of U.S. business cycles has declined in the last two decades. In this paper we document that, contrary to this, during the same period firms' financial flows have become more volatile. Within a model with financial markets frictions we then investigate the role played by financial innovations. THE EQUITY PREMIUM IMPLIED BY PRODUCTION, SLIDES, (2010, Journal of Financial Economics 98, 279-296)
This paper studies the determinants of the equity premium as implied by producers' first-order conditions. STOCK MARKET BOOM AND THE PRODUCTIVITY GAINS OF THE 1990S, joint with V. Quadrini, (2007, Journal of Monetary Economics, 413-432)
Together with a sense of entering a New Economy, the US experienced in the second half of the 1990s an economic expansion, a stock market boom, a financing boom for new firms and productivity gains. In this paper, we propose an interpretation of these events within a general equilibrium model with financial frictions and decreasing returns to scale in production. USING ASSET PRICES TO MEASURE THE PERSISTENCE OF THE MARGINAL UTILITY OF WEALTH, joint with F. Alvarez, (Econometrica, November 2005, 1977-2016 )
We derive a lower bound for the size of the permanent component of investors' marginal utility of wealth, or more generally, asset pricing kernels. The bound is based on return properties of long-term zero-coupon bonds, risk-free bonds, and other risky securities. USING ASSET PRICES TO MEASURE THE COST OF BUSINESS CYCLES, joint with F. Alvarez, (Journal of Political Economy, December 2004, 1223-56 )
We measure the cost of consumption fluctuations using an approach that does not require the specification of preferences and instead uses asset prices. QUANTITATIVE ASSET PRICING IMPLICATIONS OF ENDOGENOUS SOLVENCY CONSTRAINTS, joint with F. Alvarez, (Review of Financial Studies, Winter 2001, 1117-1152)
We study the asset pricing implications of an economy where solvency constraints are determined to efficiently deter agents from defaulting. EFFICIENCY, EQUILIBRIUM, AND ASSET PRICING WITH RISK OF DEFAULT, joint with F. Alvarez, ( Econometrica, July 2000 , 775-797)
We introduce a new equilibrium concept and study its efficiency and asset pricing implications for the environment analyzed by Kehoe and Levine (1993) and Kocherlakota (1996). Our equilibrium concept has complete markets and endogenous solvency constraints. These solvency constraints prevent default at the cost of reducing risk sharing. INTERNATIONAL PORTFOLIO DIVERSIFICATION AND ENDOGENOUS LABOR SUPPLY CHOICE, (European Economic Review, June 1998, 1141-1172)
This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor supply and consumption are chosen endogenously. We use this framework to study the effect of labor supply for optimal international diversification. HOUSEHOLD PRODUCTION AND THE EXCESS SENSITIVITY CONSUMPTION TO CURRENT INCOME, joint with M. Baxter (American Economic Review, September 1999)
Empirical research on the permanent income hypothesis (PIH) has found that consumption growth is excessively sensitive to predictable changes in income. This finding is interpreted as strong evidence against the PIH. We propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium version of Becker's (1965) model of household production. ASSET PRICING IN PRODUCTION ECONOMIES, (Journal of Monetary Economics, April 1998, 257-275)
This paper studies asset returns in the one-sector real business cycle model with habit formation preferences and capital adjustment costs. ASSET PRICING IN PRODUCTION ECONOMIES", FROM ECONOMIC FLUCTUATIONS AND ASSET RETURNS, ( revised: May, 1994)
NONTRADED GOODS, NONTRADED FACTORS, AND INTERNATIONAL NON-DIVERSIFICATION, with M. Baxter and R. G. King, Journal of International Economics, April 1998, 211-229
APPENDIX TO: THE INTERNATIONAL DIVERSIFICATION PUZZLE IS WORSE THAN YOU THINK (American Economic Review, March 1997, 170-180)
Discussions / Presentations
Demand-and-Supply Imbalance Risk and Long-Term Swap Spreads, by Samuel G. Hanson, Aytek Malkhozov and Gyuri Venter, ASSA 2023
Credit booms, financial crises and macroprudential policy, by Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino, 25th Anniversary of “Frontiers of Business Cycle Research” Conference, Philadelphia, 2019 Incompleteness Shocks, by Eduardo Davila and Thomas Philippon, ASSA meeting, Philadelphia, 2018 The quanto theory of exchange rates, by Lukas Kremens and Ian Martin, NBER Summer Institute IAP, Boston, 2017 Credit Shocks in an Economy with Heterogeneous Firms, by Aubhik Khan, Tatsuro Senga and Julia Thomas, Wharton Conference on Liquidity and Financial Crises, Philadelphia, 2014 Asset pricing in the frequency domain: theory and empirics, by Ian Dew-Becker and Stefano Giglio, Macro Finance Society, Columbus, 2013 Aggregate implications of a credit crunch, by Francisco Buera and Benjamin Moll, NBER Summer Institute 2011. Disaster risk and business cycles, by Francois Gourio, NBER Summer Institute AP 2010 Differences of opinion in an international financial market equilibrium, by Bernard Dumas, Karen Lewis and Emilio Osambela, NBER IFM Fall 2009 Collective Risk Management in a Flight to Quality Episode, by Ricardo Cabelloro and Arvind Krishnamurthy, NY Fed Conference 2008 Inequality, Stock Market Participation, and the Equity Premium by Jack Favilukis, ASSA, New Orleans 2008 Information Immobility and the Home Bias, by Stijn Van Nieuwerburgh and Laura Veldkamp, NBER Summer Institute IFM, Boston 2006 Human Capital, Business Cycles and Asset Pricing, by Min Wei ASSA Boston 2006 Aggregate Asset Pricing, slides from ESSFM Gerzensee 2004 focus sessions Default Risk, the Exchange Rate and Income Fluctuations in Emerging Economies, by Cristina Arellano, NBER Summer Institute IFM, July 2004 Putting the Breaks on Sudden Stops: the Financial Frictions-Moral Hazard Tradeoff of Asset Price Guarantees, by Bora Durdu and Enrique Mendoza, Federal Reserve Bank of San Francisco, June 2004 |