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Journal Article
Comovements among national stock markets
This paper uses the methodology of Hansen and Jaganathan (1991) to derive a lower bound on the correlation between any pair of asset returns under the hypothesis of complete markets. The bound is a simple function of the two assets' Sharpe ratios and the coefficient of variation of a unique stochastic discount factor. The paper uses this bound to conduct robust, nonparametric tests of the hypothesis that international equity markets are integrated. ; Using monthly stock return data from the U.S., Japan, and Great Britain for the period 1980 through 1993, I find that conclusions about market ...
Working Paper
Optimal policy with limited commitment
This paper uses Whiteman's(1986) frequency-domain optimization methodology to parameterize the precommitment period in a standard rational expectations policy design model. This allows researchers to adopt an empirical approach to the time consistency issue. That is, the operative commitment horizon in a given policy setting can be estimated along with the other parameters characterizing the preferences and constraints of the agents in the model. It is shown that the commitment horizon can be estimated by running (restricted) regressions of the policymaker's instrument variable on past values ...
Working Paper
A robust Hansen-Sargent prediction formula
This paper derives a formula for the optimal forecast of a discounted sum of future values of a random variable. This problem reflects a preference for robustness in the presence of (unstructured) model uncertainty. The paper shows that revisions of a robust forecast are more sensitive to new information, and discusses the relevance of this result to previous findings of excess sensitivity of consumption and asset prices to new information.
Journal Article
Contractionary effects of devaluation
Journal Article
Does Singapore invest too much?
Journal Article
Gaiatsu
Journal Article
Understanding trends in foreign exchange rates
Journal Article
Borrowing constraints and asset market dynamics: evidence from the Pacific Basin
This paper estimates a linearized, stochastic version of Kiyotaki and Moore's (1997) credit cycle model, using land price data from Hong Kong, Japan, and Korea. It is shown that the welfare costs of borrowing constraints are positively related to the persistence of (detrended) land price fluctuations. When the residual demand curve for land is inelastic and the steady state share of land held by the constrained sector is less than 30 percent, welfare costs are less than 1 percent GDP in all countries. However, the strained sector becomes more important and as the elasticity of ...
Journal Article
Could Russian have learned from China?
Working Paper
Interpreting the dynamics in U.S. international trade