framework starts by discerning driving forces set in motion by the initial shock. These are higher discounts applied by decision … institutions. The next step is to study how driving forces influence general equilibrium, both at the time of the initial shock and … later as its effects, persist. Some of the effects propagate the effects of the shock—they contribute to poor performance …

frictions render labor-market risk countercyclical and endogenous to monetary policy. Our main result is that a majority of …