This paper extends the existing literature on optimal unemployment insurance by allowing for self-insurance; individuals may save using a one-period riskless asset, but their access to the credit market is restricted. I show that under this market arrangement, an asset based unemployment insurance...

This paper analyzes the feedback between firms' hiring decisions and the demand for their products in environments in which agents are not well insulated from the financial consequences of unemployment. In such an environment, an increase in (the chance of ) becoming unemployed increases...

This raises the question whether standard solution techniques such as linearization are accurate enough in those models in which enough volatility is generated. This paper shows that often this is not the case. When enough volatility is generated the non-linearities matter and both first-order...

This paper develops a framework with a standard labor market matching friction and a friction in commodities markets which leads to firms not always selling everything being produced and thus to inventory accumulation. A savings glut can lead to a downward spiral in which reductions in consumer...

Changes in the stock of inventories are important for fluctuations in aggregate output. However, the possibility that firms do not sell all produced goods and inventory accumulation are typically ignored in business cycle models. This paper captures this with a goods-market friction. Using US...

We construct a method to solve models with heterogeneous agents and aggregate uncertainty that is simpler than existing algorithms; the aggregate law of motion is obtained neither by simulation nor by parameterization of the cross-sectional distribution, but by explicitly aggregating the...

Increases in uncertainty lead to increases in the unemployment rate. Using US data, I show empirically that this is due to both an increase in the separation rate and a decrease in the job-finding rate. By contrast, standard search and matching models predict an increase in the job finding rate...

We propose a method to solve models with heterogeneous agents and aggregate uncertainty. The law of motion describing aggregate behavior is obtained by explicitly aggregating the individual policy rule. The algorithm is simpler and faster than existing algorithms that rely on parameterization of...

This thesis contains several lines of research conducted during my four years at the European University Institute. It deals with two distinct topics in the area of recursive economies, developed in three chapters. The first chapter considers a general class of recursive models in which...