In this article, we provide an overview of the key mechanisms by which sectoral disturbances affect aggregate economic activity. We describe how the distribution of sectoral shares influences each sector's contribution to the variation in aggregate output. We also illustrate different aspects of...

Foreign investment is typically considered an important source of growth for developing countries. This article describes the legal protection granted to foreign investors and its enforcement mechanisms. Governments have signed international investment agreements intended to protect foreign...

We first study growth and risk sharing in a stochastic growth model with preference shocks and two risk-averse agents. In periods in which one of the agents needs extra consumption (insurance), it is socially optimal to reduce the consumption of the other agent (redistribution) and also to...

This article considers the question, raised by Beaudry and Portier in their recent articles, of whether "news shocks" can lead to expansions and contractions that look like business cycle movements. News shocks are to be thought of solely as affecting expectations (regarding future events) and...

In this article I provide a perspective on the current state of modern business cycle theory. This theory has developed from an application of the Arrow-Debreu general equilibrium framework to the neoclassical growth model. On the positive side, this approach is able to accommodate various...

There are large differences in welfare—measured as gross domestic product (GDP) per capita—across nations. Over time, there are numerous country experiences in relative income of catch-up, collapse, and catch-up followed by a decline. What explains why some countries are rich and others...

The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some...

The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some...

This article documents the contributions of non-owner occupants to the demand for housing prior to the housing crisis. In addition, this article observes the post-origination performance of non-owner-occupied mortgages during the crisis. Theory tells us that non-owner occupant homeowners differ...