I study the transmission of risk premia to aggregate consumption. While prior work emphasises capital prices as the key link between risk premia and consumption, I argue for a distinct propagation channel: cheaper household borrowing. I build a quantitative macro model with capital and risky household debt where a key driving force is shocks to risk premia. Analytically, I show that the consumption of the cross section of households can distinguish between different propagation channels. Empirically, I find that consumption growth comoves most strongly with risk premia for households with consumer credit, consistent with a dominant role for household credit supply. Quantitatively, the model replicates the aggregate and cross-sectional consumption responses to changes in risk premia. Changes in household credit conditions account for around three quarters of the two-year consumption response to a financial shock. I use the model to study stabilisation policies, finding that household credit market intervention is more cost-effective than capital subsidies.

Leveraged investors such as hedge funds hold trillions of dollars of government-backed bonds, financed in the repo market. We propose a general equilibrium theory of why these positions emerge and how they shape the term structure of bond yields and swap rates. Households value payment instruments; intermediaries produce these convenient assets by issuing short-term claims backed by collateral, subject to a value-at-risk constraint. Despite higher expected returns on riskier securities, risk-tolerant intermediaries hold safe bonds because low funding costs amplify the levered returns of low-margin assets. The model generates endogenous market segmentation and rationalizes negative swap spreads, the recent divergence of convenience yields and Treasury premia, and an upward sloping yield curve that does not rely on the covariance of inflation with growth. Quantitatively, we use the model to evaluate central bank asset purchases, fiscal expansions, and disruptions to intermediaries' risk-bearing capacity.

We study how the maturity structure of consolidated government debt shapes monetary transmission and welfare. Empirically, we show that a US monetary tightening persistently lowers government purchases and raises debt, while transfers do not respond and tax receipts fall with activity. In a New Keynesian model with separate fiscal and central bank balance sheets, monetary tightening is amplified through a fiscal channel: rising interest costs on debt force spending cuts. Under a Taylor rule, short-term debt dampens the response of public spending to demand shocks and welfare peaks at an interior share of short-term debt. Under optimal policy with commitment, long-term debt is welfare-optimal because it allows the central bank to stabilise demand fluctuations without contemporaneous fiscal disruptions.

This article extends the model of matching with incomplete information presented by Liu et al. (2014) by imposing exogenous restrictions on the beliefs of firms. The main result is that generically, there is always some game that contradicts the imposition of exogenous beliefs. This result complements Liu et al. (2014) by showing that their focus on stability for all reasonable beliefs is appropriate.

The Reserve Bank's Term Funding Facility (TFF) was announced in March as part of a monetary policy package to reduce funding costs across the economy and to support lending, especially to small and medium-sized businesses. Most of the initial allocations of the TFF were drawn upon by the time the first phase of the facility closed in September. In September, the Reserve Bank Board adjusted the TFF in response to economic conditions, expanding and extending the facility and in November it lowered the interest rate on new drawings. Drawdowns from the TFF have increased the Reserve Bank's balance sheet significantly and the facility has contributed to an easing in financial conditions. As a result of the Reserve Bank's policy measures, including the TFF, bank funding costs and lending rates are at historically low levels.

A number of economies in South-East Asia have been making significant progress in their economic development. This article focuses on the largest middle-income economies in South-East Asia: Indonesia, Malaysia, Thailand, the Philippines and Vietnam. We examine the developments in these economies over recent decades, explore their relationship with Australia and the global economy and consider their potential to reach a significantly higher level of income. These economies have benefited from favourable demographics over recent decades although some will face pressures from ageing populations. However, there are ample opportunities to gain from further improvement in infrastructure, education and labour force participation.