In this paper, we develop a theoretical model which identifies four channels-import prices, competition with domestic suppliers and workers, and commodity prices-through which priceand wage-setting conditions in country j may affect inflation in country i. We estimate a dynamic inflation...

Bond markets in emerging markets are illiquid as investors and issuers grapple with major microstructure and legal issues. The importance of bond markets as a source of finance has increased during the economic slowdown as companies diversified away from reliance on banks for funding and many...

Various papers have identified shocks to investment as major drivers of output, investment, hours, and interest rates. These investment shocks have been linked to financial frictions because financial markets are instrumental in transforming consumption goods into installed capital. However, the...

This paper presents the business cycle model that Trygve Haavelmo developed as part of his research program in macroeconomic and monetary theory. Driven by a mismatch between the marginal return to capital and the rate of return required by capital owners, this model generates endogenous cycles....

Corporate credit spreads are large, volatile, countercyclical, and significantly larger than expected losses, but existing macroeconomic models with financial frictions fail to reproduce these patterns, because they imply small and constant aggregate risk premia. Building on the idea that...

We study housing and debt in a quantitative general equilibrium model. In the cross-section, the model matches the wealth distribution, the age pro?les of homeownership and mortgage debt, and the frequency of housing adjustment. In the time-series, the model matches the procyclicality and...

This paper adds a highly-leveraged financial sector to the Ramsey model of economic growth and shows that this causes the economy to behave in a highly volatile manner: doing this strongly augments the macroeconomic effects of aggregate productivity shocks. Our model is built on the financial...

This paper studies the macroeconomic implications of firms' investment composition choices in the presence of credit constraints. Following a negative and persistent aggregate productivity shock, firms shift into short-term investments because they produce more pledgeable output and because they...

We study the cyclical implications of credit market imperfections in a calibrated dynamic, stochastic general equilibrium model wherein firms face persistent shocks to aggregate and individual productivity. In our model economy, optimal capital reallocation is distorted by two frictions:...

This paper develops an RBC model where banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show that maturity transformation in...