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...

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...

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...

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...

We develop a model of gross job and worker flows and use it to study how the wages, permanent incomes, and employment status of individual workers evolve over time. Our model helps explain various features of labor markets, such as the amount of worker turnover in excess of job reallocation, the...

We develop a variation of the macroeconomic model of banking in Gertler and Kiyotaki (2011) that allows for household liquidity risks and bank runs as in Diamond and Dybvig (1983). As in Gertler and Kiyotaki, because bank net worth fluctuates with aggregate production, the spread in the expected...

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behaviour over a lifetime. We develop an overlapping generations model of a production economy in which land and capital are combined into residential and...