Working Papers

We use a cross-sectional valuation model that distinguishes between the operating and financial activities of the firm to examine the repercussions of three main alternative measures of pension expense. The GAAP Method recognizes a smoothed net pension expense, the NETCOST Method includes the excess of interest cost over the actual ...

The canonical inflation specification in sticky-price rational expectations models (the new-Keynesian Phillips curve) is often criticized on the grounds that it fails to account for the dependence of inflation on its own lags. In response, many recent studies have employed a "hybrid" sticky-price specification in which inflation depends on a ...

The motor vehicle industry has undergone important changes in recent years, including a shift in production from autos to light trucks and growth of vehicle leasing. This paper uses household-level data from the Federal Reserve's Survey of Consumer Finances to document changes in households' acquisitions and financing of motor vehicles ...

This paper presents a re-formulated version of a canonical sticky-price model that has been extended to account for variations over time in the central bank's inflation target. We derive a closed-form solution for the model, and analyze its properties under various parameter values. The model is used to explore topics ...

Mortgage-backed securities, with their relative structural simplicity and their lack of recovery rate uncertainty if default occurs, are particularly suitable for developing and testing risky debt valuation models. In this paper, we develop a two-factor structural mortgage pricing model in which rational mortgage-holders endogenously choose when to prepay and default ...

Central banks pay close attention to inflation expectations. In standard models, however, inflation expectations are tied down by the assumption of rational expectations and should be of little independent interest to policy makers. In this paper, we relax the assumption of rational expectations with perfect knowledge and reexamine the role ...

Nominal short term interest rates have been low in the United States, so low that some have wondered whether the federal funds rate is likely to hit its lower bound at 0 percent. Such a scenario, which some economists have called the liquidity trap, would imply that the Federal Reserve ...

This paper provides a simple unified framework for assessing the empirical linkages between returns and realized and implied volatilities. First, we show that whereas the volatility feedback effect as measured by the sign of the correlation between contemporaneous return and realized volatility depends importantly on the underlying structural model parameters, ...

The latest revision of the Internal Ratings Based approach of the Basel Committee on Banking Supervision's New Capital Accord Proposal for retail portfolios contains a significant innovation relative to previous versions: the recognition that, for revolving credits, future margin income will be available to cover losses before a bank's capital ...

Discrete time queueing models have been shown previously to be of practical use for modelling the approximate time-dependent behaviour of queue length in systems of the form M(t)/G/c. In this paper we extend these models to include the time-dependent behaviour of virtual waiting time. Key components of this research are ...