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Abstract: We characterize a three-factor model of commodity spot
prices, convenience yields, and interest rates, which nests many existing specifications.
The model allows convenience yields to depend on spot prices and interest
rates. It also allows for time-varying risk premia.
Both may induce mean reversion in spot prices, albeit with very different
economic implications. Empirical results show strong evidence for
spot-price level dependence in convenience yields for crude oil and copper,
which implies mean reversion in prices under the risk-neutral measure.
Silver, gold, and copper exhibit time variation in risk premia
that implies mean reversion of prices under the physical measure.
Abstract: I develop and estimate a monetary business cycle model
with nominal loans and collateteral constraints
tied to housing values. Demand shocks move housing and nominal prices in the
same direction, and are amplified and propagated over time. The financial
accelerator is not uniform: nominal debt dampens supply shocks, stabilizing
the economy under interest rate control. Structural estimation supports two
key model features: collateral effects dramatically improve the response of
aggregate demand to housing price shocks; and nominal debt improves the
sluggish response of output to inflation surprises. Finally, policy
evaluation considers the role of house prices and debt indexation in
affecting monetary policy trade-offs.
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