We study competitive equilibrium in sequential economies under limited commitment. Default induces permanent exclusion from financial markets and endogenously determined solvency constraints prevent debt repudiation. Our analysis shows that such an enforcement mechanism is essentially fragile,...

Recent literature on structural vector autoregressions has attempted to identify the effects on the economy of an increase in the stock of money. This work has led to a broad concensus. Initially, an increase in money leads to an increase in economic activity. Output and employment go up, the...

We consider inflation and debt dynamics under a global interest rate rule when private agents forecast using adaptive learning. Given the zero lower bound on interest rates, active interest rate rules are known to imply the existence of a second, low-inflation steady state. Under learning the...

It is well known that if there are mild sector-specific externalities, then the steady state of the standard two-sector real business cycle model can become indeterminate and endogenous business cycles can arise. We show that this result is not robust to the introduction of standard...

In this paper, we study a monetary random-matching model where both goods and money are perfectly divisible, production is costly, and there is no exogenous upper bound on agents' money holdings, information on which is private to the agent. We show that there is a continuum of stationary...