Edouard Challe

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JEL classification: E31 E52 G12 Keywords: Monetary policy Asset prices New Keynesian general equilibrium model a b s t r a c t Empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on real stock prices: a 100-basis point increase in the nominal interest rate is associated with an immediate decrease in(More)
We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause fluctuations in the trading price of bonds. Long bonds command a " liquidation risk premium " over short(More)
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