predictions of a large class of models in which the current account is a vehicle for consumption smoothing and investment …

lags in investment which enables the model to generate both hump-shaped output dynamics and a lead-lag relation between … asset prices and investment, as is consistent with the data. Finally, we allow for heterogeneity among firms to capture the …

change in the sensitivity of homebuilding to mortgage interest rates. Second, business fixed investment has become more …

. After a negative macroeconomic shock, relatively risk tolerant investors sell risky assets while more risk averse investors … risk after a negative macroeconomic shock and lower exposure after a positive shock …

financial shock, and firm entry investment that requires traded goods. This mechanism provides an example of how firm dynamics …This paper demonstrates theoretically that a financial shock can have very persistent effects on international trade … persistently slower growth rate in trade. We find conditions under which a transitory financial shock significantly reduces the …

sectors because of default risk. An adverse domestic shock increases the likelihood of default, limits capital inflows, and … thus restricts the ability of the economy to exploit investment opportunities. The economy responds by reducing investment …