NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Sushil Wadhwani

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Working Papers

May 2002Asset Prices in a Flexible Inflation Targeting Framework
with Stephen G. Cecchetti, Hans Genberg: w8970
We argue that there are sound theoretical reasons for believing that an inflation targeting central bank might improve macroeconomic performance by reacting to asset price misalignments over and above the deviation of, say, a two-year ahead inflation forecast from target. In this paper, we first summarize the arguments for our basic proposition. We then discuss some of the counter-arguments. Specifically, we counter those who argue that reacting to asset prices does not improve macroeconomic performance by claiming that they are attacking the 'straw man' under which central bankers react in the same way to all asset price changes. We continue to emphasize that policy reactions to asset price misalignments must be qualitatively different from reactions to asset prices changes driven by fund...

Published: Hunter, William C., George G. Kaufman and Michael Pomerleano (eds.) Asset Price Bubbles: Implications for Monetary, Regulatory, and International Policies." Cambridge, MA: MIT Press, 2002.

May 1990Volatiltiy and Links Between National Stock Markets
with Mervyn King, Enrique Sentana: w3357
The empirical objective of this study is to account for the time-variation the covariances between markets. Using data on sixteen national stock markets, we estimate a multivariate factor model in which the volatility of returns is induced by changing volatility in the orthogonal factors. Excess returns are assumed to depend both on innovations in observable economic variables and on unobservable factors. The risk premium on an asset is a near combination of the risk premia associated with factors. The main empirical finding is that only a small proportion of the time variation in the covariances between national stock markets can be accounted for by observable economic variables. Changes in correlations markets are given primarily by movements in unobservable variables. We also estimate t...

Published: Econometrica, vol 62, no. 4, (July 1994) pp. 901-933 citation courtesy of

March 1989Transmission of Volatility Between Stock Markets
with Mervyn A. King: w2910
This paper investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. The idea is that "contagion" between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets. This provides a channel through which a "mistake" in one market can be transmitted to other markets. Hourly stock price data from New York, Tokyo and London during an eight month period around the crash offer support for the contagion model. In addition, the magnitude of the contagion coefficients are found to increase with volatility.

Published: Review of Financial Studies, Vol. 3, No. 1, pp. 5-33, 1990. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

 
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