This paper proposes a model that links households and firms, as usual, by markets for factors and goods and, additionally, by a banking sector that channels households' funds to firms and eliminates idiosyncratic risk. In equilibrium, agency costs and tax benefits of corporate debt are...

This paper traces the evolution of John Maynard Keynes's theory of the business cycle from his early writings in 1913 to his policy prescriptions for the control of fluctuations in the early 1940s. The paper identifies six different "theories" of business fluctuations. With different theoretical...

As the coronavirus pandemic spread across the globe in early 2020, the European Central Bank as well as national governments in the euro area enacted or announced numerous economic policy measures to counteract the severe economic consequences of the resulting lockdowns. In this paper, the...

We develop a quantitative business cycle model with search complementarities in the inter-firm matching process that entails a multiplicity of equilibria. An active equilibrium with strong joint venture formation, large output, and low unemployment coexists with a passive equilibrium with low...

We develop a quantitative business cycle model with search complementarities in the inter-firm matching process that entails a multiplicity of equilibria. An active static equilibrium with strong joint venture formation, large output, and low unemployment can coexist with a passive static...

I study how unsecured credit affects the extent to which unemployment insurance (UI) policies smooth cyclical fluctuations in aggregate consumption. To do so, I develop a real business cycle model with incomplete asset markets, frictional labor markets, and defaultable debt. Using empirically...

We document five novel facts about the role of search effort in forming trading relationships among firms by combining a variety of micro and macro datasets. These facts strongly suggest the presence of search complementarities. To study the implications of these facts for aggregate...

We build an otherwise-standard business cycle model with housework, calibrated consistently with data on time use, in order to discipline consumption-hours complementarity and relate its strength to the size of fiscal multipliers. We show that if substitutability between home and market goods is...

This paper examines the dynamics of Keynesian models that incorporate feedback effects from the labor market to income distribution, investment, aggregate demand and output. A baseline version of the model can generate endogenous growth cycles, but cumulative divergence and economic collapse...

Financial intermediaries issue the majority of liquid securities, and nonfinancial firms have become net savers, holding intermediaries' debt as cash. This paper shows that intermediaries' liquidity creation stimulates growth -- firms hold their debt for unhedgeable investment needs -- but also...