I add a moral hazard problem between banks and depositors as in Gertler and Karadi (2009) to a DSGE model with a costly state verification problem between entrepreneurs and banks as in Bernanke et al. (1999) (BGG). This modification amplifies the response of the external finance premium and the...

We study the aggregate implications of (S,s) inventory policies in a dynamic general equilibrium model with aggregate uncertainty. Firms in the model's retail sector face idiosyncratic demand risk, and (S,s) inventory policies are optimal because of fixed order costs. The distribution of...

We develop a production based asset pricing model with financially constrained firms to explain the observed high asset price volatility. Investment opportunities are scarce and firms face two shocks: classic productivity shocks and financial shocks that affect the tightness of the financial...

In this paper we analyze the impact of uncertainty shocks on the Brazilian economy. We use a general equilibrium model in such a way that the transmission channels of the shocks could be identified and we solve the model using a third order approximation for the policy functions since lower...

Empirical evidence demonstrates that credit standards, including lending margins and collateral requirements, move in a countercyclical direction. In this study, we construct a small open economy model with financial frictions to generate the countercyclical movement in credit standards. Our...