Roger Farmer, Carine Nourry, Alain Venditti, 13 January 2013

Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. This paper provides such an explanation, demonstrating that financial markets, by their very nature, cannot be Pareto efficient except by chance. Although individuals in our model are rational; markets are not.

Alberto Martin, Jaume Ventura, 16 February 2011

Modern economies often experience large movements in asset prices that have significant macroeconomic effects. Yet many of these movements in asset prices seem unrelated to economic fundamentals and are often termed “bubbles”. This column explains how recent advances in the theory of rational bubbles can help us to understand these movements in asset prices and their macroeconomic implications.

Robert Barro, Emi Nakamura, Jón Steinsson, Jose Ursua, 08 July 2010

Previous research suggests that the potential for rare, but large, economic disasters helps explain the equity-premium and related asset-pricing puzzles. This column presents evidence from a new empirical model of consumption disasters and discusses a range of assumptions required for the model to predict the observed long-run average equity premium.

Axel Leijonhufvud, 13 May 2008

In CEPR Policy Insight No. 23, Axel Leijonhufvud asks not what we have learnt, but what we should have learnt from Keynes in light of the current financial turmoil.

Axel Leijonhufvud, 13 May 2008

The US Federal Reserve has used unorthodox policy instruments to reduce recent financial turmoil. In this column, the author of CEPR Policy Insight 23 argues that the crisis raises more fundamental questions about core tenets of modern monetary orthodoxy – inflation targeting and central bank independence.

Katrin Assenmacher-Wesche, Stefan Gerlach, 12 March 2008

Many observers have argued that central banks should use monetary policy to prevent the rise of asset price bubbles. Recent research shows that monetary policy is too costly and too slow to serve such a role.

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