Mortgage defaults

We incorporate house price risk and mortgages into a standard incomplete market (SIM) model. We calibrate the model to match U.S. data and we show that the model also ac- counts for non-targeted features of the data such as the distribution of down payments, the life-cycle profile of home ownership, and the mortgage default rate. In addition, we show that the average coefficients that measure the agents' ability to self-insure against income shocks are similar to those of a SIM model without housing (as presented by Kaplan and Violante, 2010). However, incorporating housing increases the values of these coefficient for younger agents, which narrows the gap between the SIM model's implications and the data. The response of consumption to house price shocks is minimal. We also study the effects of default prevention policies. Introducing a minimum down payment requirement of 15% reduces defaults on mortgages by 30%, reduces the home ownership rate up to only 0.2 percentage points (if the aggregate house price level does not adjust), and may cause house prices to decline up to 0.7% (if home ownership does not adjust). Garnishing defaulters' income in excess of 43% of median consumption for one year produces a similar decline in defaults; but, since it reduces the median equilibrium down payment from 19% to 9%, it boosts home ownership up to 4.3 percentage points (if the aggregate house price level does not adjust) and may increase house prices up to 16.1% (if home ownership does not adjust). The introduction of minimum down payments or income garnishment benefit a majority of the population.Mortgage loans ; Default (Finance)

Employment dynamics during economic recoveries

Employment turnover was significantly lower following the Great Recession than following the previous two recessions.Employment

Starting a business during a recovery: this time, it's different

Business cycles ; Economic conditions

Quantifying the impact of financial development on economic development

How important is financial development for economic development? A costly state verification model of financial intermediation is presented to address this question. The model is calibrated to match facts about the U.S. economy, such as intermediation spreads and the firm-size distribution for the years 1974 and 2004. It is then used to study the international data, using cross-country interest-rate spreads and per-capita GDP. The analysis suggests a country like Uganda could increase its output by 140 to 180 percent if it could adopt the world?s best practice in the financial sector. Still, this amounts to only 34 to 40 percent of the gap between Uganda?s potential and actual output.Economic development ; Intermediation (Finance)

Financing development: the role of information costs

To address how technological progress in financial intermediation affects the economy, a costly state verification framework is embedded into the standard growth model. The framework has two novel ingredients. First, firms differ in the risk/return combinations that they offer. Second, the efficacy of monitoring depends upon the amount of resources invested in the activity. A financial theory of firm size results. Undeserving firms are over financed, deserving ones under funded. Technological advance in intermediation leads to more capital accumulation and a redirection of funds away from unproductive firms toward productive ones. With continued progress, the economy approaches its first-best equilibrium.Economic development ; Intermediation (Finance)

Pricing tranched credit products with generalized multifactor models

The market for tranched credit products (CDOs, Itraxx tranches) is one of the fastest growing segments in the credit derivatives industry. However, some assumptions underlying the standard Gaussian onefactor pricing model (homogeneity, single factor, Normality), which is the pricing standard widely used in the industry, are probably too restrictive. In this paper we generalize the standard model by means of a two by two model (two factors and two asset classes). We assume two driving factors (business cycle and industry) with independent tStudent distributions, respectively, and we allow the model to distinguish among portfolio assets classes. In order to illustrate the estimation of the parameters of the model, an empirical application with Moody's data is also included

Exchange Rate Volatility and Economic Performance in Peru: A Firm Level Analysis

This paper analyzes the impact of the exchange rate volatility on the performance of the Peruvian economy using financial information from 163 non-financial listed firms. We find evidence that, for firms holding dollar-denominated debt, investment decisions are negatively affected by real exchange rate depreciation. The reasons behind this result are: (i) the high degree of liability dollarization and currency mismatch that create the conditions for a balance sheet effect and a financial stress in the aftermath of a currency depreciation, (ii) the strong bank-lending channel that follows and reinforces the balance sheet effect, (iii) the domestic demand shrinkage that affects severely the firms sales, and (iv) the relatively small and poorly diversified export sector.

Detrás de las Golondrinas, Expanded Territory: the Humberto Ak ́abal ́s Pilgrim Books

Indexación: Revista UNABDetrás de las golondrinas es una compilación del año 2002 publicada en México. Allí, Humberto Ak’abal (Momostenango-Guatemala, 1952) reúne tres libros/homenajes anteriores (Gaviota y sueño, 2000, sobre su encuentro con Venecia; Ovillo de seda, 2001, testimonio de su encuentro con Japón; y Corazón de Toro, 2002, un acercamiento poético a España) así como poemas in- éditos de sus diversas jornadas por Austria, París, Suiza, Alemania y Estados Unidos entre los años 1994 y 2001. A partir de esta compilación, el presente artículo tiene dos objetivos principales: primero, demostrar cómo, acorde con una noción particular del “territorio” y las “confluencias”, la obra de Humberto Ak’abal desborda las etiquetas críticas de “lo maya”, “lo étnico”, “lo guatemalteco” y “la oralitura”; y, segundo, reubicar este libro más allá del espacio-tiempo de la propia comunidad maya, haciendo énfasis en la heterogeneidad, la migración y las subjetividades nativas. Nociones sobre el cosmopolitismo, la globalización y el territorio habrán de discutirse a lo largo del texto.Detrás de las golondrinas is a compilation published in 2002 in Mexico, in which Humberto Ak’abal (Momostenango-Guatemala, 1952) presents three books already published (Gaviota y sueño, 2000, is about his visit to Venice, Ovillo de seda, 2001, is a testimony about his encounter with Japan, and Corazón de Toro, 2002, is a poetic approach to Spain) and several small unedited books about his journeys through Austria, Paris, Switzerland, Germany, and the United States between 1994 and 2001. Based on this compilation, this article has two principal objectives: first, to demonstrate how a particular meaning of “territory” and “confluences”, according to the proposal of Ak’abal, overpasses the labels of “Mayan”, “ethnic”, “Guatemalan” and “Orature”. And, second, to situate this book beyond Mayan society’s space and time, explaining concepts as heterogeneity, migration, native subjectivity, cosmopolitanism and globalization.http://revistahumanidades.unab.cl/numero-26-julio-diciembre-2012