Roger Craine

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Ongoing questions on the historical mean and standard deviation of the return on equities and bonds and on the equilibrium demand for these securities are addressed in the context of a stationary, overlapping-generations economy in which consumers are subject to a borrowing constraint. The key feature captured by the OLG economy is that the bulk of the(More)
The dollarization of bank deposits and credit is widespread in developing countries, resulting in varying degrees of currency mismatches in domestic financial intermediation, which in turn may accentuate balance sheet problems and thus financial fragility. It is widely argued that flexible exchange rate regimes encourage banks to match dollar-denominated(More)
We use balance sheet and National Income and Products Accounts data to Ž . calibrate factor shares in a model with three factors land, labor, and capital and Ž . three sectors business, household, and government . These estimates are used in an overlapping generations model with land to study the long-run implications for social security. In this setup,(More)
This paper investigates whether health, a nontradeable risky asset, can explain reductions in financial risk-taking after retirement. A theoretical model is proposed in which individuals who care about consumption and health are initially endowed with health but risk becoming unhealthy. If adverse health shocks increase the marginal utility of consumption,(More)
I compare the performance of alternative monetary rules for Canada using an open economy model under incomplete markets. Different rules generate different paths for the markup and the terms of trade. A comparison of welfare levels suggests that flexible inflation targeting, the Bank of Canada’s current policy, dominates strict targeting rules—among which a(More)
This paper studies the political sustainability of the existing pay-as-you-go Social Security system in the face of recent demographic patterns. We analyze different approaches to privatizing the system and consider what it would require for them to be politically implementable. The analysis is based on an overlapping-generations economy where an initial(More)
The negative balance sheet effect of currency depreciation is believed to play an important role in the development of economic crises. However, a series of firmlevel studies have failed to discover evidence of this negative effect. This paper uses a sample of non-financial firms in Asia, a region where the importance of the balance sheet effect is believed(More)
With the rise of international bond markets in the 1990s, the role of sovereign credit ratings has become increasingly important. In the aftermath of Asian Crises a series of empirical studies on the effects of sovereign ratings appeared. The theoretical literature on the topic, however, remains rather scarce. We propose a model of rating agencies that is(More)
We propose a model of rating agencies that is an application of global game theory in which heterogeneous investors act strategically. The model allows us to explore the impact of the introduction of a rating agency on financial markets. Our model suggests that the addition of the rating agency affects the probability of default and the magnitude of the(More)