I construct a tractable model to evaluate the liquidity shock hypothesis that exogenous shocks to equity market liquidity are an important cause of the business cycle. After calibrating the model, I find that a large and persistent negative liquidity shock can generate large drops in investment,...

We construct a dynamic macro model to incorporate financial frictions and investment delay. Investment is undertaken by entrepreneurs who face liquidity frictions in the equity market and a collateral constraint in the debt market. After calibrating the model to the US data, we quantitatively...

In this paper I examine whether a society can improve welfare by imposing a legal restriction to forbid the use of nominal bonds as a means of payments for goods. To do so, I integrate a microfounded model of money with the framework of limited participation. While the asset market is Walrasian,...

This paper integrates limited participation into monetary search theory to analyze the liquidity effects of open market operations. The centralized bonds market features limited participation and shocks to government bond sales, while the decentralized goods market features bilateral matches....

Equity price is cyclical and often leads the business cycle by one or two quarters. These observations lead to the hypothesis that shocks to equity market liquidity are an independent source of the business cycle. In this paper I construct a model to evaluate this hypothesis. The model is easy...

Using micro-level data for the U.S., we provide new evidence-at national and state levels - of a positive (negative) relationship between the standard deviation (coefficient of variation) and the average in bank lending-rate markups. In a quantitative theory consistent with these empirical...

The effects of households' indebtedness on their house-selling decisions are studied in a dynamic equilibrium model with search in the housing market and defaultable long-term mortgages. In equilibrium, both sellers' asking prices and time-to-sell increase with the relative size of their...

Using micro-level data for the U.S., we provide new evidence-at national and state levels - of a positive (negative) relationship between the standard deviation (coefficient of variation) and the average in bank lending-rate markups. In a quantitative theory consistent with these empirical...