We study the importance of financial markets for (un)employment fluctuations in a model with matching frictions where firms borrow under limited enforcement. Borrowing affects employment through ‘debt bargaining channel’: higher debt improves position employers workers and increases incentive to hire. estimate structurally find that channel accounts 26 percent unemployment fluctuations. empiric...

Abstract It is hard to overstate the importance that concept of symmetry has had in every field physics, a fact alluded by Nobel Prize winner P.W. Anderson, who once wrote “physics study symmetry”. Whereas idea widely used science general, very few (if not almost no) applications found its way into finance. Still, phenomenon appears relevant terms for example strategies can happen decision maki...

The stock market crash of 1987 sent shock waves through the world's financial markets. Stock exchanges in New York, Chicago, London, Tokyo, Frankfurt, and a host of other cities suffered major declines. In response, credit markets, commodity markets, and foreign exchange markets registered sharp swings. Not since the Great Depression had the world seen such turmoil in financial markets. But, dr...

The quantitative study of financial markets is more and more widespread due to their growing importance in the economy and everyday life. Financial markets can be viewed as real-world complex dynamical systems which are continually evolving, have significant practical importance and produce an enormous amount of data recording the aggregate action of many participants. In recent years, the quan...

The complex behavior of financial markets emerges from decisions made by many traders. Here, we exploit a large corpus of daily print issues of the Financial Times from 2(nd) January 2007 until 31(st) December 2012 to quantify the relationship between decisions taken in financial markets and developments in financial news. We find a positive correlation between the daily number of mentions of a...

This paper studies Pareto-optimal risk-sharing arrangements in a private information economy with aggregate uncertainty and ex ante heterogeneous agents. I show how to implement Pareto optima as equilibria when agents can trade claims to consumption contingent on aggregate shocks in financial markets. The first result is that if aggregate and idiosyncratic shocks are independent, the implementa...