A long standing issue in macroeconomics is that of the relation of imperfect competition to fluctuations in output. In this paper we examine the relation between monopolistic competition and the role of aggregate demand in the determination of output. We first show that monopolistically...

The paper studies under what conditions the value of the firm occasionally increases for a while before it suddenly drops, like a "bubble". We consider the environment where the trend of net cash flow from a firm's production depends on uncertain quality of a manager, and the manager is...

The purpose of this lecture is to look beyond the complex events that characterize the global financial and economic crisis, identify the basic mechanisms, and infer the policies needed to resolve the current crisis, as well as the policies needed to reduce the probability of similar events in...

This is a Chinese translation of ""Rethinking Macro Policy II"" (SDN/13/03). This note explores how the economic thinking about macroeconomic management has evolved since the crisis began. It discusses developments in monetary policy, including unconventional measures; the challenges associated...

This paper looks at models of unemployment which make two central assumptions. The first is that wages are bargained between firms and employed workers, and that unemployment affects the outcome only to the extent that it affects the labor market prospects of either employed workers or of firms....

This paper shows how one can interpret the joint movements of wages, unemployment and vacancies in the Phillips and Beveridge spaces to learn about the origins of the movements in unemployment. The view of the labor market underlying the conceptual framework emphasizes flows, matching, and Nash...

This paper analyzes the issue of persistent high unemployment. It focuses on two channels of persistence. The first is capital accumulation. The paper analyzes investment decisions under imperfect competition, focusing in particular on the effects of demand and cost shocks on investment, capital...

After liberalizing international transactions of financial assets, many countries experiencelarge swings in asset prices, capital flows, and aggregate production. This paper studies howthe adjustment to capital account liberalization depends upon the degree of development of adomestic financial...

We study theoretically how the adjustment to liberalization of international…nancial transaction depends upon the degree of domestic …nancial development.Using a model with domestic and international borrowing constraints, we showthat, when the domestic …nancial system is underdeveloped,...

We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities, explicitly incorporating the zero bound on the short-term nominal interest rate. Within this framework, we ask: Can a shock to the liquidity of private paper lead to a collapse in short-term...