positions that require small reallocations. In such circumstances, welfare can increase if the government steps in, purchases private assets on its own account, and resells them when the economy recovers.

This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of <xref ref-type="bibr" rid="R13">Houthakker (1955-1956)</xref>. It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in <xref ref-type="bibr" rid="R20">Mortensen and Pissarides (1994)</xref>. An...

We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they meet, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive and...

This paper proposes an aggregative model of total factor productivity (TFP) in the spirit of Houthakker (1955-1956). It considers a frictional labour market where production units are subject to idiosyncratic shocks and jobs are created and destroyed as in Mortensen and Pissarides (1994). An...

We investigate how trading frictions in asset markets affect portfolio choices, asset prices and efficiency. We generalize the search-theoretic model of financial intermediation of Duffie, Gârleanu and Pedersen (2005) to allow for more general preferences and idiosyncratic shock structure,...

This paper studies the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We allow money-holders to choose the intensities with which they search for trading partners, so inflation affects the frequency of trade as well as the quantity of output...

We study the effects of anticipated inflation on aggregate output and welfare within a search-theoretic framework. We consider two pricing mechanisms: ex post bargaining and a notion of competitive pricing. Under bargaining, the equilibrium is generically inefficient and an increase in inflation...

Ricardo Lagos is Associate Professor of Economics at New York University. He is interested in monetary economics, especially the theory of search in money.

We develop a model of the market for federal funds that explicitly accounts for its two distinctive features: banks have to search for a suitable counterparty, and once they have met, both parties negotiate the size of the loan and the repayment. The theory is used to answer a number of positive...