This paper proposes an integrated framework to analyze jointly two key issues: the emergence of global imbalances and the precautionary motive for accumulating reserves. Standard models of general equilibrium would predict modest current account surpluses in the emerging markets if they face...

Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangible is complementary with production...

This paper proposes a moment-matching method for approximating vector autoregressions by finite-state Markov chains. The Markov chain is constructed by targeting the conditional moments of the underlying continuous process. The proposed method is more robust to the number of discrete values and...

This paper presents an overview of different models which explain financial crises, with the aim of understanding economic developments during and possibly after the Great Recession. In the first part approaches based on efficient markets and rational expectations hypotheses are analyzed, which...

This paper introduces heterogeneous households into an otherwise standard sticky-price model with industry-specific labor markets. Households differ in labor incomes and asset markets are incomplete. I show that household heterogeneity affects equilibrium dynamics nontrivially by amplifying...

Buffer-stock versions of the dynamic stochastic optimizing model of saving are now standard in the consumption literature. This paper builds theoretical foundations for rigorous understanding of the main characteristics of buffer stock models, including the existence of a target level of wealth...

This paper assessed the quantitative impact of ambiguity on historically observed financial asset returns and growth rates. The single agent, in a dynamic exchange economy, treats the conditional uncertainty about the consumption and dividends next period as ambiguous. We calibrate the agent's...

The combination of credit constraints and indivisible consumption goods may induce some risk-averse individuals to gamble to have a chance of crossing a purchasing threshold. One implication of this is that income effects for individuals who choose to gamble are likely to be larger than for the...

Previous studies on financial frictions have been unable to establish the empirical significance of credit constraints in macroeconomic fluctuations. This paper argues that the muted impact of credit constraints stems from the absence of a mechanism to explain the observed persistent comovements...

We argue that positive comovements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the comovements by incorporating two key features into a DSGE model: we introduce...