This paper analyzes the role of variable capital-utilization rates in propagating shocks over the business cycle. The model on which the authors' analysis is based treats variable capital-utilization rates as a form of factor-hoarding. They argue that variable capital-utilization rates are a...

We provide a simple explanation for the observation from the U.S. manufacturing sector that the job destruction rate fluctuates more than the job creation rate. In our model, proportional plant-level costs of creating and destroying jobs cause shrinking plants to be more sensitive to aggregate...

Two modifications are introduced into the standard real-business-cycle model: habit preferences and a two-sector technology with limited intersectoral factor mobility. The model is consistent with the observed mean risk-free rate, equity premium, and Sharpe ratio on equity. In addition, its...

Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency "compensate US investors for taking on more US consumption growth risk," yet the stochastic discount factor corresponding to their benchmark model is approximately uncorrelated with...

This paper uses a new database on foreign aid to examine the relationships among foreign aid, economic policies, and growth per capita GDP. We find that aid has a positive impact on growth in developing countries with good fiscal, monetary, and trade policies but has little effect in the...

Hours worked and the return to working are weakly correlated. Traditionally, the ability to account for this fact has been a litmus test for macroeconomic models. Existing real-business-cycle models fail this test dramatically. The authors modify prototypical real-business-cycle models by...