Accounting for observed fluctuations in aggregate employment, consumption, and real wage using the optimality conditions of a representative household often requires preferences that are incompatible with economic priors (e.g., Mankiw, Rotemberg, and Summers 1985). This discrepancy between the...

This paper analyzes the extent of risk-sharing among stockholders. To provide a benchmark, we ask if stockholders are able to share risk more effectively than non-stockholders, where the latter serves as a control group. We study a dynamic structural model where each period households compare...

A search-theoretic model of equilibrium unemployment is constructed and shown to be consistent with the key regularities of the labor market and business cycle. The two distinguishing features of the model are: (i) the decision to accept or reject jobs is modeled explicitly, and (ii) markets are...

In this paper we study the asset pricing implications of a parsimonious two-agent macroeconomic model with two key features: limited participation in the stock market and heterogeneity in the elasticity of intertemporal substitution. The parameter values for the model are taken from the real...

We undertake a quantitative analysis of the dispersion of current accounts in an open economy version of incomplete insurance model, incorporating important market frictions in trade and financial flows. Calibrated with conventional parameter values, the stochastic stationary equilibrium of the...

This paper attempts to reconcile two opposing views about the elasticity of intertemporal substitution in consumption (EIS), a parameter that plays a key role in macroeconomic analysis. On the one hand, empirical studies using aggregate consumption data typically find that the EIS is close to...