When large, discrete technological improvements require the accumulation of research or infrastructural investment over time, growth paths display cyclical patterns even in the absence of any shocks. Particularly interesting equilibrium features of these cycles include declines in output and...

There are substantial differences in business cycle fluctuations across countries. These differences are systematically related to the share of agriculture in the economy: Countries with a high share of employment in agriculture feature high fluctuations in aggregate output, low relative...

Shimer (2005) demonstrated that aggregate productivity shocks in a standard matching model cause fluctuations in key labor market statistics---such as the job-finding rate, the vacancy/unemployment ratio, and the unemployment rate---that are too small by an order of magnitude. This paper shows...

A central challenge to monetary business cycle theory is to find a solution to the problem of persistence in the real effect of monetary shocks. Previous research has identified separately specific factors and intermediate inputs as two promising mechanisms for generating the persistence in a...

This paper examines the impact of sticky price and limited participation frictions, both separately and combined, in a dynamic stochastic general equilibrium model. Using U.S. data on output, inflation, interest rates, money growth, consumption, and investment, likelihood ratio tests and...

Open economy extensions of real business cycle models, even if generally successful, have met some difficulties replicating a few important stylized facts. In particular these models tend to predict excessive consumption smoothing and consumption correlation across countries. The observed...

What is the effect of non-tradeable idiosyncratic risk on asset-market risk premiums? Constantinides and Duffie (1996) and Mankiw (1986) have shown that risk premiums will increase if the idiosyncratic shocks become more volatile during economic contractions. We add two important ingredients to...

This paper construct a two-sector model of two-period lived overlapping generations with endogenous occupational choice where ability-heterogeneous agents choose whether to become educated when young. We show that the steady-state equilibrium can be locally indeterminate even under linear...

I study the welfare cost of business cycles in a complete-markets economy where some people are more risk averse than others. Relatively more risk-averse people buy insurance against aggregate risk, and relatively less risk-averse people sell insurance. These trades reduce the welfare cost of...

This paper analyzes the welfare costs of business cycles when workers face uninsurable idiosyncratic labor income risk. In accordance with the previous literature, this paper decomposes labor income risk into an aggregate and an idiosyncratic component, but in contrast to the previous...