This paper sets up and computes a stochastic neoclassical growth model where agents face uninsurable idiosyncratic labor income risk and heterogenous discount factors. Households value government purchases which are financed by income taxes. The government cannot commit to future streams of...

Is time-varying firm-level uncertainty a major cause or amplifier of the business cycle? This paper investigates this question in the context of a heterogeneousfirm RBC model with persistent firm-level productivity shocks and lumpy capital adjustment, where cyclical changes in uncertainty...

Using a unique German firm-level data set, this paper is the first to jointly study the cyclical properties of the cross-sections of firm-level real value added and Solow residual innovations, as well as capital and employment adjustment. We find two new business cycle facts: 1) The...

Microeconomic lumpiness matters for macroeconomics. According to our DSGE model, it is responsible for 92 percent of the smoothing in the investment response to aggregate shocks, and it introduces important nonlinearities and history dependance in business cycles and policy sensitivity. General...

This paper characterizes quantitatively the business cycle dynamics of public consumption in a neoclassical representative household model with endogenous and time-consistent public policy. We show that a simple frictionless version of such a model with productivity as the only aggregate driving...

This paper quantifies the distributional costs of fiscal uncertainty in a neoclassical stochastic growth environment. We set up an incomplete-market model where heterogeneous households face uninsurable idiosyncratic risks in the processes of labor income and discount factor. Aggregate...

Firms expect certain investment expenditures. Firms realize certain investment expenditures. The difference is an investment surprise. With the help of the IFO Investment Survey for the German manufacturing sector we measure firms' (quantitative) investment expectations and firms’...

This paper uses longitudinal micro data from the Panel Study of Income Dynamics (PSID) to document the turnover behavior in the housing market. Fact 1: moves are procyclical. Fact 2: the gross flows into and out of the owner-occupied segment of the housing market are four times larger than the...

real option value effect of time-varying uncertainty.

calibration of these models.