Is the observed large increase in consumer indebtedness since 1970 beneficial for U.S. consumers? This paper quantitatively investigates the macroeconomic and welfare implications of relaxing borrowing constraints using a model with preferences featuring temptation and self-control. The model...

We develop a new dynamic general equilibrium model to explain firm entry, exit, and relocation decisions in an urban economy with multiple locations and agglomeration externalities. We characterize the stationary distribution of firms that arises in equilibrium. We estimate the parameters of the...

The literature on optimal monetary policy in New Keynesian models under both commitment and discretion usually solves for the optimal allocations that are consistent with a rational expectations market equilibrium, but it does not study whether the policy can be implemented given the available...

Optimal monetary policy for an economy with seasonal fluctuations and a cash-in-advance requirement on the purchase of consumption goods is studied. It is shown that the short delay in the availability of newly acquired funds for consumption purchases (the hallmark of cash-in-advance models)...

The author shows that the short-term nominal interest rate can anchor private-sector expectations into low inflation more precisely, into the best equilibrium reputation can sustain. He introduces nominal asset markets in an infinite horizon version of the Barro-Gordon model. The author then...

Motivated by the recent experience of the U.S. and the Eurozone, the authors describe the quantitative properties of a New Keynesian model with a zero lower bound (ZLB) on nominal interest rates, explicitly accounting for the nonlinearities that the bound brings. Besides showing how such a model...