We investigate the relative significance of differences in cognitive skills and discrimination in explaining racial/ethnic wage gaps. We show that cognitive test scores taken prior to entering the labor market are influenced by schooling. Adjusting the scores for racial/ethnic differences in...

This paper develops and applies a method for decomposing cross section variability of earnings into components that are forecastable at the time students decide to go to college (heterogeneity) and components that are unforecastable. About 60 % of variability in returns to schooling is...

This paper analyzes the optimal interest rate policy in currency crises. Firms are credit constrained and have debt in domestic and foreign currency, a situation that may easily lead to a currency crisis. An interest rate increase has an ambiguous effect on firms since it both makes more...

This paper presents a general equilibrium currency crisis model of the "third generation", in which the possibility of currency crises is driven by the interplay between private firms' credit-constraints and nominal price rigidities. Despite our emphasis on microfoundations, the model remains...