median household in the puzzle group.

Inflation and unemployment are central issues in macroeconomics. While much progress has been made on these issues by incorporating frictions using search theory, existing models analyze either unemployment or inflation. We develop a framework to analyze unemployment and inflation together. This...

particular, financial intermediaries can invest resources to monitor the returns earned by firms. The inability to monitor perfectly leads to firms earning rents. Undeserving firms are financed, while deserving ones are under funded. A more efficient monitoring technology squeezes the rents...

the contribution of housing booms and busts to business cycles.

The paper examines the link between trade openness and the benefits of exchange rate flexibility under real foreign shocks and nominal rigidities. The benefits of exchange rate flexibility are defined as the welfare difference between outcomes under fixed exchange rates and under an optimized...

overall gains from openness.

Plenary session.

We find that the sunk entry cost estimated in a model with the necessary convex factor adjustment costs are about 50 percent smaller than they are in a model without other costs of adjustment.