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Journal Article
The diverse impacts of the great recession
Nakajima, Makoto (2013-04)
The Great Recession had a large negative impact on the U.S. economy. Asset prices, most notably stock and house prices, declined substantially, resulting in a loss in wealth for many American households. In this article, Makoto Nakajima documents how diverse households were affected in a variety of dimensions during the Great Recession, in particular between 2007 and 2009, using newly available data from the 2007-2009 Survey of Consumer Finances. He discusses why it is important to look at the data on households, rather than focusing on the aggregate data, and he reviews some recent studies ...
Business Review , Issue Q2 , Pages 17-29

Working Paper
Sustainable monetary policy and inflation expectations
Armenter, Roc (2010)
The author shows that the short-term nominal interest rate can anchor private-sector expectations into low inflation more precisely, into the best equilibrium reputation can sustain. He introduces nominal asset markets in an infinite horizon version of the Barro-Gordon model. The author then analyzes the subset of sustainable policies compatible with any given asset price system at date t = 0. While there are usually many sustainable inflation paths associated with a given set of asset prices, the best sustainable inflation path is implemented if and only if the short-term nominal bond is ...
Working Papers , Paper 10-20

Conference Paper
Asset prices, exchange rates, and monetary policy: a conference sponsored by the Federal Reserve Bank of San Francisco and the Stanford Institute for Economic Policy Research, March 2-3, 2001
anonymous (2001-03)
Proceedings , Issue Mar

Journal Article
Looking for evidence of time-inconsistent preferences in asset market data.
Kocherlakota, Narayana R. (2001-07)
This study argues that strong evidence contradicting the traditional assumption of time-consistent preferences is not available. The study builds and analyzes the implications of a deterministic general equilibrium model and compares them to data from the U.S. asset market. The model implies that (1) because of dynamic arbitrage, the prices of retradable assets cannot reveal whether preferences are time-inconsistent; but (2) the prices of commitment assets, investments which must be held for their lifetime, can. These prices will be higher than the present values of their future payoffs only ...
Quarterly Review , Volume 25 , Issue Sum , Pages 13-24

Journal Article
Asset prices, exchange rates, and monetary policy
Rudebusch, Glenn D. (2001)
This Economic Letter summarizes the papers presented at the conference "Asset Prices, Exchange Rates, and Monetary Policy" held at Stanford University on March 2-3, 2001, under the joint sponsorship of the Federal Reserve Bank of San Francisco and the Stanford Institute for Economic Policy Research
FRBSF Economic Letter

Working Paper
The impact of monetary policy on asset prices
Sack, Brian P.; Rigobon, Roberto (2002)
Estimating the response of asset prices to changes in monetary policy is complicated by the endogeneity of policy decisions and the fact that both interest rates and asset prices react to numerous other variables. This paper develops a new estimator that is based on the heteroskedasticity that exists in high frequency data. We show that the response of asset prices to changes in monetary policy can be identified based on the increase in the variance of policy shocks that occurs on days of FOMC meetings and of the Chairman's semi-annual monetary policy testimony to Congress. The identification ...
Finance and Economics Discussion Series , Paper 2002-4

Working Paper
Liquidity in asset markets with search frictions
Rocheteau, Guillaume; Lagos, Ricardo (2007)
We study how trading frictions in asset markets affect the distribution of asset holdings, asset prices, efficiency, and standard measures of liquidity. To this end, we analyze the equilibrium and optimal allocations of a search-theoretic model of financial intermediation similar to Duffie, Grleanu and Pedersen (2005). In contrast with the existing literature, the model we develop imposes no restrictions on asset holdings, so traders can accommodate frictions by varying their trading needs through changes in their asset positions. We find that this is a critical aspect of investor behavior in ...
Working Papers (Old Series) , Paper 0706

Report
No good deals—no bad models
Boyarchenko, Nina; Crosby, John; Cerrato, Mario; Hodges, Stewart (2012)
Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced utility function and show that model uncertainty increases investors? effective risk aversion. Using this utility function, we extend the ?no good deals? methodology of Cochrane and Sa-Requejo (2000) to compute lower and upper good-deal bounds in the presence of model uncertainty. We illustrate the methodology using some numerical examples.
Staff Reports , Paper 589

Journal Article
Economic theory and asset bubbles
Barlevy, Gadi (2007-07)
The author summarizes what economic theory tells us about when asset price bubbles can occur and what the welfare implications are from bursting them. In some cases, bursting a bubble may make society worse off by exacerbating the market distortions that give rise to the bubble in the first place.
Economic Perspectives , Volume 31 , Issue Q III , Pages 44-59

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