Conventional RBC models have been heavily criticized for their inability to generate the estimated negative correlations of hours and productivity in response to technology shocks ('productivity-hours puzzle'). In this paper we show that by just enhancing the standard frame- work with investment...

We develop a stochastic general equilibrium model in which maintenance endogenously affects the capital depreciation rate. The model performs well in generating maintenance series that match closely existing survey-based measures for Canada. Maintenance is procyclical and comoves almost always...

In the light of the recent financial crisis, we investigate the effects generated by limited asset market participation on optimal monetary and fiscal policy, where monetary and fiscal authority are independent and play strategically. We find that limited asset market participation strongly...