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Discussion Paper
Non-Financial Corporate Credit and Recessions
The global financial crisis of 2008-09 (GFC) followed an extended period of growth in non-financial corporate (NFC) sector debt. NFC corporate debt resumed its climb a few years after the GFC, and the pace of growth picked up in 2020, as firms took on debt to cover revenue lost during the pandemic or to build up precautionary liquidity buffers.
Working Paper
SONOMA: a Small Open ecoNOmy for MAcrofinance
We develop a new small open economy model (SONOMA) in which domestic corporate debt and equities are affected by shocks to both external credit and equity markets. In a novel empirical analysis of several small-but-developed economies, we show that both external debt and equity shocks are important determinants of domestic economic fluctuations, corporate leverage, and net foreign asset positions. SONOMA replicates our empirical facts about asset prices, financial flows, and economic activity.
Working Paper
Trend-Cycle Decomposition and Forecasting Using Bayesian Multivariate Unobserved Components
We propose a generalized multivariate unobserved components model to decompose macroeconomic data into trend and cyclical components. We then forecast the series using Bayesian methods. We document that a fully Bayesian estimation, that accounts for state and parameter uncertainty, consistently dominates out-of-sample forecasts produced by alternative multivariate and univariate models. In addition, allowing for stochastic volatility components in variables improves forecasts. To address data limitations, we exploit cross-sectional information, use the commonalities across variables, and ...
Working Paper
What is Certain about Uncertainty?
Researchers, policymakers, and market participants have become increasingly focused on the effects of uncertainty and risk on financial market and economic outcomes. This paper provides a comprehensive survey of the many existing measures of risk, uncertainty, and volatility. It summarizes what these measures capture, how they are constructed, and their effects, paying particular attention to large uncertainty spikes, such as those appearing concurrently with the outbreak of COVID-19. The measures are divided into three types: (1) news-based, survey- based, and econometric; (2) asset market ...