The US government has recently conducted large scale purchases of assets and implemented policies that reduced the cost of funds to financial institutions. Arguably these policies have helped to correct credit market dysfunctions, allowing interest rate spreads to shrink and output to begin a...

This paper develops two dynamic general equilibrium models in which private information about borrowers' riskiness causes adverse selection in credit markets. The models feature a new shock, referred as a lemons shock, which changes the riskiness of return for some but not all borrowers in the...

We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of...