In U.S. data 1981-2012, unsecured firm credit moves procyclically and tends to lead GDP, while secured firm credit is at best acyclical. In this paper we develop a tractable dynamic general equilibrium model in which unsecured firm credit arises from self-enforcing borrowing constraints...

This paper provides a method to analytically (or tractably) solve (S,s) inventory policies in general equilibrium. This solution method can handle large state space with many state variables, such as multiple capital stocks, lagged aggregate investment and consumption, and other predetermined...

have only limited) access to external funds

The research led by Gali (AER 1999) and Basu et al. (AER 2006) raises two important questions regarding the validity of the RBC theory: (i) How important are technology shocks in explaining the business cycle? (ii) Do impulse responses to technology shocks found in the data reject the assumption...

Financial capital and fixed capital tend to flow in opposite directions between poor and rich countries. Why? What are the implications of such two-way capital flows for global trade imbalances and welfare in the long run? This paper introduces frictions into a standard two-country neoclassical...

Government spending plays an emportant role in determining economic performance in China. As an example, China's rapid recovery during the recent world financial crisis was due to its aggressive 4-trillion RMB government stimulus program. However, China's government spending programs are also...

We show that dependence on foreign energy can increase economic instability by raising the likelihood of equilibrium indeterminacy, hence making fluctuations driven by self-fulfilling expectations easier to occur. This is demonstrated in a standard neoclassical growth model. Calibration...

We use a unique detailed database with individual state campaign contributions made by banks in U.S. from 1998 to 2010 to understand how these contributions influence the regulation of the banking industry in that state, and in particular the approval of bank mergers by the state banking...

There are two facts about the world that we take as given: First the "law of one price" is false -- one can find many different prices for what appears to be, beyond reasonable doubt, the same good. Second, prices are set in nominal terms and appear, beyond reasonable doubt, to be sticky -- some...

This paper studies the link between banking crises, sovereign default and government guarantees. A banking crisis can lead to a domestic credit crunch, which can be mitigated by government guarantees. However, the provision of bailout guaran- tees exposes the government to potentially severe...