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Keywords:Asset prices 

Journal Article
Asset Bubbles: Detecting and Measuring Them Are Not Easy Tasks

Market bubbles are linked to many historic financial crises, but asset price run-ups can reflect both fundamental value changes and psychological contagion. Using historic values of commonly held assets (stocks and real estate), a novel ?exuberance index? offers a way to compare bubbles.
The Regional Economist , Issue July

Working Paper
Bubbles as Payoffs at Infinity

We define rational bubbles to be securities with payoffs occurring in the infinitely distant future and investigate the behavior of bubble values. We extend our analysis to a setting of uncertainty. In an infinite-horizon arbitrage-free model of asset prices, we interpret the money market account as the value of a particular bubble; a similar interpretation holds for other assets related to the state-price deflator and to payoffs on bonds maturing in the distant future. We present three applications of this characterization of bubbles.
Finance and Economics Discussion Series , Paper 1996-09

Report
Intergenerational Redistribution in the Great Recession

We construct a stochastic overlapping-generations general equilibrium model in which households are subject to aggregate shocks that affect both wages and asset prices. We use a calibrated version of the model to quantify how the welfare costs of big recessions are distributed across different household age groups. The model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages. Asset price declines hurt the old, who rely on asset sales to finance consumption, but benefit the young, who purchase ...
Staff Report , Paper 498

Working Paper
International Asset Markets and Real Exchange Rate Volatility

The real exchange rate is very volatile relative to major macroeconomic aggregates and its correlation with the ratio of domestic over foreign consumption is negative (Backus-Smith puzzle). These two observations constitute a puzzle to standard international macroeconomic theory. This paper develops a two country model with complete asset markets and limited enforcement for international financial contracts that provides a possible explanation of these two puzzles. The model performs better than a standard incomplete markets model with a single non-contingent bond unless very tight borrowing ...
International Finance Discussion Papers , Paper 884

Working Paper
Turnover Liquidity and the Transmission of Monetary Policy

We provide empirical evidence of a novel liquidity-based transmission mechanism through which monetary policy influences asset markets, develop a model of this mechanism, and assess the ability of the quantitative theory to match the evidence.
Working Papers , Paper 734

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