What brings persistence into the macroeconomy? This is one of the big unresolved issues in current macroeconomic theory. Economic models, in fact, typically struggle to imply levels of persistence comparable to those observed in the data. Most of the persistence is therefore introduced by highly...

This paper assesses the effects of agency costs and asymmetric information in credit markets. Asymmetric information and agency costs occur whenever lenders delegate control over resources to borrowers, leading to adverse selection, moral hazard and monitoring costs because of the inability to...

We study unofficial dollarization, i.e., the use of foreign money alongside the domestic currency, in an environment where spatial separation and limited communication create a role for currency and banks arise endogenously to provide insurance against liquidity preference shocks. Unofficial...

We study unofficial dollarization, i.e., the use of foreign money alongside the domestic currency, in an environment where spatial separation and limited communication create a role for currency and banks arise endogenously to provide insurance against liquidity preference shocks. Unofficial...

We consider a general equilibrium model where monetary policy has redistributive effects. Agents have stochastic preferences and face random buying and selling opportunities. We show that the Friedman rule is just the second best policy. However, the Friedman rule is Pareto optimal. It requires...

This paper analyzes price formation and dynamics according to the industry structure. It divides manufacturing industries of Mexico into two groups: perfectly and imperfectly competitive. The results show that imperfectly competitive industries predominate. Then this classification is used to...

The paper recognizes that expectations and the process of their formation are subject to standard decision making and are determined as a part of equilibrium. Accordingly, the paper presents a basic framework in which the form of expectation formation is a choice variable. At any point in time...

This paper seeks to shed light on how manufacturing job flows and productivity in Argentina were affected during the 1990s by economic reforms in general and particularly by: a) financial shocks, b) labor reforms that change non-wage labor costs, c) trade reforms that alter tariff dispersion, d)...

We carry out a detailed analysis of quarterly frequency dynamics in major macroeconomic aggregates in twelve countries of Central and Eastern Europe. The facts we document include the variability and persistence in and the co-movement among output and other major real and nominal variables....

Extant estimates of the welfare cost of business cycles suggest that this cost is quite low and might well be minuscule. Those estimates are based on consumption data for the United States as a whole. The volatility of aggregate consumption, however, is much stronger at the state level. We argue...