One of the most well-known puzzles in international economics is the Lucas paradox: Why doesn't capital flow from rich to poor countries? Given the low capital-output ratios in developing countries, the difference in unconditional expected returns from investing there rather than in developed...

In this paper we analyze analytically, quantitatively, and empirically a framework where labor supply has three distinct roles. First, as usual, it increases contemporaneous earnings. Second, because of incomplete asset markets, it provides some partial insurance for idiosyncratic labor...

We develop a model in which asymmetric information gives rise to both problems of adverse selection and costly state verification. Under the separating equilibrium in the credit market, some borrowers are credit rationed. We consider three types of government subsidies: interest rate subsidy,...

We analyze, in the context of a small open economy, the welfare effects of a monetary rule in which the central bank targets the nominal exchange rate. We show that, if the uncovered interest parity (UIP) holds, this rule is equivalent to the standard Taylor rule in terms of impulse responses to...

Attention is scarce and reading details of applications for a job, a flat rental, or a school admission is a matter of choice. We study how the knowledge of ethnicity impacts the level of attention to an individual and how that can give rise to discrimination. We show that the choices of...

The corporate income tax rate in the U.S. is almost forty percent. This high tax rate has been associated with depressing employment growth. Cutting or even eliminating corporate income tax has been proposed during the recent presidential campaigns based on the idea that a lower tax rate can...

We document that the co-movement of inflation and domestic consumption growth fluctuates over time. We argue that the co-movement of inflation and domestic consumption growth affects debt pricing and debt dynamics. In particular, a positive co-movement of inflation and consumption makes returns...

This paper revisits long-run determinants of house prices and analyzes the house price dynamics with the Korean data, while taking into account the close relationships between house prices and household debt. We also attempt to forecast trend house prices over the next five years. The result of...

This paper investigates how different monetary policy regime switching types impact macroeconomic dynamics. Policy switches that either affect the inflation target or the response to deviations of inflation from target leads to different determinacy regions and different output, interest rates,...

Starting a new business is risky. This paper asks how entrepreneurial productivity risk has changed over time in the US and how this has affected employment. I estimate this risk using micro data on the size distribution of new businesses and their exit rates. The paper distinguishes upside and...