This paper develops a new theory of long term unsecured credit contracts based on costly contracting that matches the data in a variety of dimensions. Credit lines are long term relations between lending firms and households that pre-specify a credit limit and interest rate in each period....

This paper studies properties of economies with complete markets where there is positive default on consumer debt. Households can default partially, at a punishment cost, and intermediaries price this risk competitively. This en- vironment yields only partial insurance. The risk-based pricing of...

We use a model a la Bewly-Huggett-Ayagari to explore the effects of a credit crunch on consumer spending. Households borrow and lend to smooth idiosyncratic income shocks facing an exogenous borrowing constraint. We look at the economy response after an unexpected permananent tightening of this...

Firms commonly spread out their debt expirations across time to reduce the liquidity risk generated by large quantities of debt expiring at the same time. By doing so, they introduce a dynamic coordination problem. In deciding whether to rollover his debt, each maturing creditor is concerned...

We first study export dynamics in a number of large devaluation episodes in emerging markets. Using plant level data, we document that exports expand gradually following a large devaluation primarily because the number of exporters expands gradually. We further show the strong negative...

Preliminary results show that when this model is parameterized to match a number of targets - in particular the joint cross-sectional distribution of liquid and illiquid wealth - it is able to generate responses to fiscal stimulus payments of the observed order of magnitude. The model is also...

Sorting, Employment and Wages in multi-worker firms

This paper analyzes a business cycle model with labor market frictions as well as an extensive labor supply margin. There are exogenous aggregate shocks to productivity, the job finding rate, and the separation rate. Workers also face idiosyncratic productivity (wage) shocks that they cannot...

We use a search model of the labor market in which jobs are characterized by flexibility (such as the possibility of working from home, or discretion in choosing work-hours) to estimate the distribution of preferences over flexibility. In an hedonic wage model, a job amenity is estimated to...

We present a general equilibrium model to understand the implications of short-term debt playing a special role in an economy in providing liquidity and facilitating transactions. In our model the supplies of short-term public and private debt are an endogenous outcome of optimal actions by the...