Consumer debt has increased substantially in the US since the 1980s. We show in a incomplete-markets model with durables and occasionally binding collateral constraints that neither the higher uninsurable income risk of US consumers nor the financial deregulation explain this increase. The...

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.

We explore the quantitative importance of pricing complementarities in the context of a menu cost model of price adjustment. Using super-market scanner data, we document new evidence on the co-movement of prices and market shares at the product level, suggesting that changes in prices and market...