National Bureau of Economic Research

About: National Bureau of Economic Research is a nonprofit organization based out in Cambridge, Massachusetts, United States. It is known for research contribution in the topics: Monetary policy & Population. The organization has 2626 authors who have published 34177 publications receiving 2818124 citations. The organization is also known as: NBER & The National Bureau of Economic Research.

How Sovereign is Sovereign Credit Risk

Abstract: We study the nature of sovereign credit risk using an extensive sample of CDS spreads for 26 developed and emerging-market countries. Sovereign credit spreads are surprisingly highly correlated, with just three principal components accounting for more than 50 percent of their variation. Sovereign credit spreads are generally more related to the U.S. stock and high-yield bond markets, global risk premia, and capital flows than they are to their own local economic measures. We find that the excess returns from investing in sovereign credit are largely compensation for bearing global risk, and that there is little or no country-specific credit risk premium. A significant amount of the variation in sovereign credit returns can be forecast using U.S. equity, volatility, and bond market risk premia.

Predicting Returns with Financial Ratios

Abstract: This article provides a new test of the predictive ability of aggregate financial ratios. Predictive regressions are subject to small-sample biases, but the correction in previous studies can substantially understate forecasting power. Dividend yield predicts aggregate market returns from 1946 - 2000, as well as in various subperiods. Book-to-market and the earnings-price ratio predict returns during the shorter 1963 - 2000 sample. The evidence remains strong despite the unusual price run-up in recent years.

A Macroprudential Approach to Financial Regulation

Abstract: Many observers have argued the regulatory framework in place prior to the global financial crisis was deficient because it was largely “microprudential” in nature (Crockett, 2000; Borio, Furfine, and Lowe, 2001; Borio, 2003; Kashyap and Stein, 2004; Kashyap, Rajan, and Stein, 2008; Brunnermeier et al., 2009; Bank of England, 2009; French et al., 2010). A microprudential approach is one in which regulation is partial-equilibrium in its conception, and aimed at preventing the costly failure of individual financial institutions. By contrast, a “macroprudential” approach recognizes the importance of general-equilibrium effects, and seeks to safeguard the financial system as a whole. In the aftermath of the crisis, there seems to be agreement among both academics and policymakers that financial regulation needs to move in a macroprudential direction. According to Federal Reserve Chairman Ben Bernanke (2008): Going forward, a critical question for regulators and supervisors is what their appropriate "field of vision" should be. Under our current system of safety-and-soundness regulation, supervisors often focus on the financial conditions of individual institutions in isolation. An alternative approach, which has been called systemwide or macroprudential oversight, would broaden the mandate of regulators and supervisors to encompass consideration of potential systemic risks and weaknesses as well.

Individual and Corporate Social Responsibility

Abstract: Society’s demands for individual and corporate social responsibility as an alternative response to market and distributive failures are becoming increasingly prominent. We first draw on recent developments in the “psychology and economics” of prosocial behavior to shed light on this trend, which reflects a complex interplay of genuine altruism, social or self image concerns, and material incentives. We then link individual concerns to corporate social responsibility, contrasting three possible understandings of the term: the adoption of a more long-term perspective by firms, the delegated exercise of prosocial behavior on behalf of stakeholders, and insider-initiated corporate philanthropy. For both individuals and firms we discuss the benefits, costs and limits of socially responsible behavior as a means to further societal goals.