This paper studies how government uses inflation tax to finance public goods affects the circulation of a national currency in a two-country search theoretic model. Each country consists of infinitely-lived private agents and a government. A representative agent obtains utility from the private...

We show that price stickiness is predicted by the theory of second best, applied to a random- matching model of money. The economy is hit with iid, aggregate, preference shocks, and allocations are allowed to be history dependent. Due to individual anonymity and lack of commitment, implementable...

The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed time-variation in...

Economies respond differently to aggregate shocks that reduce output. While some countries rapidly recover their pre-crisis trend, others stagnate. Recent studies provide empirical support for a connection between aggregate growth and plant dynamics through their effect on productivity: the...

We quantify the effect of financial leverage on stock return volatility in a dynamic general equilibrium economy with debt and equity claims. We study the effects of financial leverage on the market portfolio, and on a small firm with idiosyncratic and market risk. In an economy with both a...

This paper analyzes the general equilibrium effects of capital tax when there is a mandated minimum wage. The analysis is conducted in an inter-temporal search model in which firms post wages as in Burdett and Mortensen (1998). A(binding) minimum wage provides alower support for the distribution...

Financing retirement benefits is probably the most significant fiscal challenge that governments in industrial economies will be facing in the next few decades. Social security reform has therefore become an important public policy issue for many countries and various reform proposals have been...

Investment is often irreversible, especially at the aggregate level. This paper proposes and solves a general equilibrium model of technology adotpion when investment in the new technlogy is irreversible. In contrast to prior research, we consider a setup where the returns on technology adoption...