The paper analyzes under what circumstances policymakers experiment with policies with uncertain outcomes, when they prefer to imitate policies initiated in other countries, and when they prefer to coordinate policies internationally. Policymakers have private costs of active policies and...

We estimate a three-variate VAR using proxies of global financial uncertainty, the global financial cycle, and world industrial production to simulate the effects of the jump in financial uncertainty observed in correspondence of the Covid-19 outbreak. We predict the cumulative loss in world...

In this paper we use the property that certainty equivalence, as implied by a first-order approximation to the solution of stochastic discrete-time models, breaks in its equivalent continuous-time version. We study the extent to which a first-order approximated solution built by perturbation...

How much does inequality matter for the business cycle and vice versa? Using a Bayesian likelihood approach, we estimate a heterogeneous-agent New-Keynesian (HANK) model with incomplete markets and portfolio choice between liquid and illiquid assets. The model enlarges the set of shocks and...

We argue that risk sharing motivates the bank-wide structure of bonus pay. In the presence of financial frictions that make external financing costly, the optimal contract between shareholders and employees involves some degree of risk sharing whereby bonus pay partially absorbs earnings shocks....

What are the incentives for governments to coordinate their policies internationally when there is model disagreement and uncertainty? We build a model where countries disagree on policy targets and how policies affect the economies, and show that uncertainty not only determines the type of...

This paper studies attention allocation behavior of rationally inattentive consumers who have CRRA preferences, face uninsured capital income risk, and suffer from an information-processing capacity constraint. For given attention devoted to capital income risk, we solve for the optimal...

How does uncertainty affect the costs of raising finance in the bond market and via bank loans? Empirically, this paper finds that heightened uncertainty is accompanied by an increase in corporate bond yields and a decrease in bank lending rates. This finding can be explained with a model that...