We study the role of financial frictions and balance-sheet effects in accounting for the dynamics of aggregate exports in large devaluations. We investigate a small open economy with heterogeneous firms, where firms face financing constraints and debt can be denominated in foreign units.
This paper demonstrates how adding nominal wage rigidity to a standard sticky price model can create a mechanism by which increases in government spending cause increases in consumption. The increase in output arising from government purchases puts upward pressure on the price level.
This paper studies the role of international trade delivery lags and variation in the intertemporal
marginal rate of substitution in accounting for puzzling features of cyclical fluctuations of
international trade volumes.
What is the prescription of Ramsey capital taxes for Aiyagari’s (1994) incomplete-markets
economy in the steady state? Departing from the endogenous setting in Aiyagari (1995), this
paper answers the question by considering an exogenous stream of government purchases
as in the canonical Ramsey problem.
This paper presents a theoretical model (adapted from the structural gravity model
by Anderson and van Wincoop, 2003) to capture the effects of terrorism on air passenger traffic
between nations affected by terrorism.
The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment.
This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies.
Developing countries frequently offer tax incentives and even subsidize the entry and operation of foreign firms. I examine the optimality of such policies in an economy where growth is driven by entrepreneurial know-how, a skill that is continuously updated on the basis of the productive ideas implemented in the country.
Along with health, Social Security Disability Insurance (SSDI) evaluates work-limiting disability by considering vocational factors including age, education, and past work experience. As the number of SSDI applicants and awards has increased, these vocational criteria are increasingly important to acceptances and denials.
China is undergoing its long-awaited industrial revolution. There is no shortage of commentary and opinion on this dramatic period, but few have attempted to provide a coherent, in-depth, political economic framework that explains the fundamental mechanisms behind China’s rapid industrialization.
The 1960s and 1970s witnessed rapid growth in the markets for new money market instruments, such as negotiable certificates of deposit (CDs) and Eurodollar deposits, as banks and investors sought ways around various regulations affecting funding markets.
This paper proposes a theoretical and quantitative analysis of the reallocation of labor across firms in response to idiosyncratic shocks of different persistence. Creating and destroying jobs is costly and workers are paid a share of the value of the marginal worker.
As a result of legal restrictions on branch banking, an extensive interbank system developed in the United States during the 19th century to facilitate interregional payments and flows of liquidity and credit. Vast sums moved through the interbank system to meet seasonal and other demands, but the system also transmitted shocks during banking panics.