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Arvind Krishnamurthy
Journal Articles

The Macroeconomics of Corporate Debt

Markus Brunnermeier, Arvind Krishnamurthy
The Review of Corporate Finance Studies, 2020 November 30, 2020
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Working Papers

Dissecting Mechanisms of Financial Crises: Intermediation and Sentiment

Arvind Krishnamurthy, Wenhao Li
SSRN, 2020 June 30, 2020

We develop a model of financial crises with both a financial amplification mechanism, via frictional intermediation, and a role for sentiment, via time-varying beliefs about an illiquidity state. We confront the model with data on credit spreads, equity prices, credit, and output across the financial crisis cycle. In particular, we ask the model to match data on the frothy pre-crisis behavior of asset markets and credit, the sharp transition to a crisis where asset values fall, disintermediation occurs and output falls, and the post-crisis period characterized by a slow recovery in output.

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Journal Articles

Mind the Gap in Sovereign Debt Markets: The US Treasury basis and the Dollar Risk Factor

Arvind Krishnamurthy, Hanno N. Lustig
SSRN, 2019 September 8, 2019

The U.S. dollar exchange rate clears the global market for dollar-denominated safe assets. We find that shifts in the demand and supply of safe dollar assets are important drivers of variation in the dollar exchange rate, bond yields, and other global financial variables. An increase in the convenience yield that foreign investors derive from holding safe dollar assets causes the dollar to appreciate, and incentivizes foreign debtors to tilt their issuance towards dollar-denominated instruments. U.S.

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Journal Articles

A Model of Safe Asset Determination

Zhiguo He, Arvind Krishnamurthy, Konstantin Milbradt
American Economic Review, 2019 April 1, 2019

What makes an asset a “safe” asset? We study a model where two countries each issue sovereign bonds to satisfy investors’ safe asset demands.

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