Haku

We extract cycles in the term spread (TMS) and study their role for predicting the equity risk premium (ERP) using linear models. The low frequency component of the TMS is a strong and robust out-of-sample ERP predictor. ...

We show that the impact of government bailouts (liquidity injections) on a representative bank’s risk taking depends on the level of systematic risk of its loans portfolio. In a model where bank’s output follows a geometric ...

We study the impact of financing constraints on investment and output dynamics, in a continuous time setting with output a linear function of capital. Decline of net worth reduces investment and, if firms can rent capital ...