We develop a methodology that allows DSGE models to capture the empirical content of informational frictions while bypassing the computational challenges that come with conventional formalizations of such frictions. We apply this methodology in the context of an RBC model augmented with a type...

This paper presents a dynamic model of structural unemployment and occupational choice in which an economy is subjected to aggregate reallocation shocks and workers may choose to incur costs to retrain in order to move into occupations that pay higher wages. As it is costly for workers to...

This paper presents a model of macroeconomic fluctuations driven by agents competing to secure shares in new markets. The resulting fluctuation resemble a gold rush in the sence that they increase economic activity but may be of limited social gain. We use different techniques to evaluate the...

This paper studies optimal taxation in a class of economies in which agents have dispersed private information regarding aggregate shocks (commonly-relevant fundamentals such as aggregate productivity and demand conditions). The dispersion of information opens the door to inefficiencies that...

We study how the heterogeneity of information impacts the efficiency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying...

the potential heterogeneity in priors.

This paper explores the role of the financial sector in facilitating the flow of funds from borrowers to lenders. Unlike in traditional models of banking, the role of financial firms in our model is not to raise funds from lenders (depositors) and use them to make loans to borrowers. Rather...

We study how the heterogeneity of information impacts the efficiency of the business cycle and the design of optimal fiscal and monetary policy. We do so within a model that features a standard Dixit-Stiglitz demand structure, introduces dispersed private information about the underlying...

This paper develops a novel theory of the origins of fluctuations. This theory dispenses with the dubious notions of exogenous disturbances to technologies, preferences, or mysterious wedges. Instead, it points out the central role that self-fulfilling expectations can play in shaping short-run...