NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Jose Ursua

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Working Papers

August 2011Rare Macroeconomic Disasters
with Robert J. Barro: w17328
The potential for rare macroeconomic disasters may explain an array of asset-pricing puzzles. Our empirical studies of these extreme events rely on long-term data now covering 28 countries for consumption and 40 for GDP. A baseline model calibrated with observed peak-to-trough disaster sizes accords with the average equity premium with a reasonable coefficient of relative risk aversion. High stock-price volatility can be explained by incorporating time-varying long-run growth rates and disaster probabilities. Business-cycle models with shocks to disaster probability have implications for the cyclical behavior of asset returns and corporate leverage, and international versions may explain the uncovered-interest-parity puzzle. Richer models of disaster dynamics allow for transitions be...
April 2010Crises and Recoveries in an Empirical Model of Consumption Disasters
with Emi Nakamura, Jón Steinsson, Robert Barro: w15920
We estimate an empirical model of consumption disasters using a new panel data set on personal consumer expenditure for 24 countries and more than 100 years, and study its implications for asset prices. The model allows for permanent and transitory effects of disasters that unfold over multiple years. It also allows the timing of disasters to be correlated across countries. Our estimates imply that the average disaster reaches its trough after 6 years, with a peak-to-trough drop in consumption of about 30%, but that roughly half of this decline is reversed in a subsequent recovery. Uncertainty about consumption growth increases dramatically during disasters. Our estimated model generates a sizable equity premium from disaster risk, but one that is substantially smaller than in models in wh...
February 2009Stock-Market Crashes and Depressions
with Robert J. Barro: w14760
Long-term data for 30 countries up to 2006 reveal 232 stock-market crashes (multi-year real returns of –25% or less) and 100 depressions (multi-year macroeconomic declines of 10% or more), with 71 of the cases matched by timing. The United States has two of the matched events—the Great Depression 1929–33 and the post-WWI years 1917–21, likely driven by the Great Influenza Epidemic. 41% of the matched cases are associated with war, and the two world wars are prominent. Conditional on a stock-market crash (return of –25% or less) in a non-war environment, the probability of a minor depression (macroeconomic decline of at least 10%) is 22% and of a major depression (at least 25%) is 3%. For contexts of currency or banking crises that occur during times of global distress, these probabilit...
April 2008Macroeconomic Crises since 1870
with Robert J. Barro: w13940
We build on the Maddison GDP data to assemble international time series from before 1914 on real per capita personal consumer expenditure, C. We also improve the GDP data in many cases. The C variable comes closer than GDP to the consumption concept that enters into usual asset-pricing equations. (A separation of consumer expenditure into durables and non-durables is feasible for only a minority of cases.) We have essentially full annual data on C for 22 countries and GDP for 35 countries, and we plan to complete the long-term time series for a few more countries. For samples that start as early as 1870, we apply a peak-to-trough method for each country to isolate economic crises, defined as cumulative declines in C or GDP by at least 10%. The principal world economic crises ranked by impo...

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