We estimate a DSGE model with (S,s) inventory policies. We find that (i) taking
inventories into account can significantly improve the empirical fit of DSGE models
in matching the standard business-cycle moments (in addition to explaining inventory
fluctuations); (ii) (S,s) inventory policies can significantly amplify aggregate output
fluctuations, in contrast to the findings of the recent general-equilibrium inventory
literature; and (iii) aggregate demand shocks become more important than technology
shocks in explaining the business cycle once inventories are incorporated into the
How do job losers use default -- a phenomenon 6x more prevalent than bankruptcy
--as a type of “informal" unemployment insurance, and more importantly, what are
the social costs and benefits of this behavior?
We review the responses of the Federal Reserve to financial crises over the past 100 years. The authors of the Federal Reserve Act in 1913 created an institution that they hoped would prevent banking panics from occurring.
The recent financial crisis has focused attention on the relationship between access to finance and international trade, triggering a burgeoning segment of the literature evaluating this link empirically.
Middle Eastern and North African (MENA) countries stand out in international comparisons of de jure obstacles to female employment and entrepreneurship. These obstacles manifest themselves in low rates of female labor participation, entrepreneurship, and ownership.
In this paper, we study the welfare consequences of imposing alternative regimes of
competition between two non-benevolent local governments that compete for mobile
firms which have private information on their degree of locational attachment or home
This paper explores the (late) nutrition-cognition link using novel panel data
from India for very young children. We estimate a value-added model of cogni-
tive development that corrects for biases in the previous literature.
This paper argues that self-fulfilling beliefs in credit conditions can generate endoge-
nously persistent business cycle dynamics. We develop a tractable dynamic general equi-
librium model in which heterogeneous firms face idiosyncratic productivity shocks.
This paper considers the impact of leisure preference and leisure externalities on growth and labor supply in a Lucas  type model, as in Gómez , with a separable non‐homothetic utility and the assumption that physical and human capital are both necessary inputs in both the goods and the education sectors.
We formulate the central bank’s problem of selecting an optimal long-run inflation
rate as the choice of a distorting tax by a planner who wishes to maximize discounted
stationary utility for a heterogeneous population of infinitely-lived households in an
economy with constant aggregate income and public information.
The two channels of default on unsecured consumer debt are (i) bankruptcy, which
legally grants partial or complete removal of unsecured debt under certain circumstances,
and (ii) delinquency, which is informal default via nonpayment.
China’s over 25% aggregate household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast-rising housing prices in China. However, cross-sectional data do not show a significant relationship between housing prices and household saving rates.
This paper develops an analytically tractable Bewley model of money featuring capital and
financial intermediation. It is shown that when money is a vital form of liquidity to meet
uncertain consumption needs, the welfare costs of inflation can be extremely large.
In February 2005 Federal Reserve Chairman Alan Greenspan noticed that the 10-year Treasury yields failed to increase despite a 150-basis-point increase in the federal funds rate as a “conundrum.” This paper shows that the connection between the 10-year yield and the federal funds rate was severed in the late 1980s, well in advance of Greenspan’s observation.
The literature on the evolution of impatience, focusing on one-person decision problems,
finds that evolutionary forces favor the more patient individuals. This paper shows that in
the context of a game, this is not necessarily the case.
The Malthusian theory of evolution disregards a pervasive fact about human
societies: they expand through conflict. When this is taken account of the long-run
favors not a large population at the level of subsistence, nor yet institutions that
maximize welfare or per capita output, but rather institutions that maximize free
We examine self-referential games in which there is a chance of understanding
an opponent’s intentions. Our main focus is on the interaction of two sources of
information about opponents’ play: direct observation of the opponent’s code-of-conduct,
and indirect observation of the opponent’s play in a repeated setting.