Edouard Challe

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This paper revisits the macroeconomic e¤ects of monetary policies in the neoclassical growth model, when incomplete markets and idiosyncratic income shocks are introduced. In the benchmark complete markets model without borrowing constraints, a permanent increase in money growth rate has no long-run e¤ect on capital accumulation and output, but only on(More)
Produce or Speculate? Asset Bubbles, Occupational Choice and Efficiency We study the macroeconomic effects of rational asset bubbles in an overlapping-generations economy where asset trading requires specialized intermediaries and where agents freely choose between working in the production or in the financial sector. Frictions in the market for deposits(More)
How do fluctuations in households’ precautionary wealth contribute to the propagation of aggregate shocks? In this paper, we attempt to answer this question by formulating and estimating a tractable structural macroeconometric model of the business cycle with nominal frictions, unemployment and incomplete insurance against unemployment risk. We argue that,(More)
This paper uses a stylised asset-pricing model to show that sunspots may cause asset returns to be predictable, a widely documented feature of many speculative markets. This result parallels and extends previous works showing that sunspots render asset prices excessively volatile. Journal of Economic Literature Classi…cation Numbers: D84, E44, G12
Recent empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on real stock prices: a 25-basis point increase in the nominal interest rate is associated with an immediate decrease in broad real stock indices that may range from 0.6 to 2.2 percent, followed by a gradual decay as real stock prices revert(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)
The value of land in the balance sheet of French firms correlates positively with their hiring and investment flows. To explore the relationship between these variables, we develop a macroeconomic model with firms that are subject to both credit and labor market frictions. The value of collateral is driven by the forward-looking dynamics of the land price,(More)
We present a general equilibrium model with incomplete markets and borrowing constraints to study the interest rate term structure. Agents face both an aggregate risk and an idiosyncratic risk of unemployment, which is not insurable. We derive a reduced heterogeneity equilibrium, which allows for analytical bond prices, whatever their maturities. The model(More)
We analyse the joint determination of price informativeness and the composition of the market by order type in a large asset market with dispersed information. The market microstructure is one in which informed traders may place market orders or full demand schedules and where market makers set the price. Market-order traders trade less aggressively on(More)